This chapter moves onto CPI (consumer price index) and PPI (producer price index). This however becomes a little confusing at times, as one can't help but wonder what the purpose of GDP and the GDP deflator is at this point. It is important to remember (or learn I suppose) that GDP measures produced goods, while the CPI focuses on purchased goods. This most definitely one of the more trickier parts of the chapter. The equations were not that hard to grasp, however I'm sure that will trip up a lot of people. I hope to fully grasp the importance and differentiate the two measurements. I also hope to remember the factors that weight into CPI misconceptions (substitution biases, Introduction to new goods, and Unmeasured quality changes.
Something I didn't quite like from this chapter was how they approached the explanation of measuring inflation. I fail to understand the differences between the inflations received from CPI and GDP deflators. The chapter also makes it seem as though the price will always increase. I think that that is very misleading, as that may not be the case if one might be looking a recession. I myself am still not quite sure how to figure out when a recession occurs, but I think that it would be great if the writer (Mankiw) or Mr. Waller took time to explicitly talk about this.
No comments:
Post a Comment