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grade level: 9-12
curriculum standards:
18
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posted on: August 16, 2001
State Standards
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Focus on Economic Data: The Inflation Rate - April 2001
Key Economic Concepts:
- Consumer Price Index (CPI)
- Deflation
- Economic Systems
- Federal Reserve
- Federal Reserve Structure
- Inflation
Explore the connection between the economic indicators and real-world issues. These lessons typically can be done in one class period.
|
Current Key Economic Indicators as of January 27, 2010 |
|
| Inflation | On a seasonally adjusted basis, the CPI-U increased 0.1 percent in December 2009 after rising 0.4 percent in November. The index for all items less food and energy rose 0.1 percent in December after being unchanged in November. (January 15, 2010) |
| Employment and Unemployment | U.S. nonfarm payroll employment edged down (-85,000) in December, and the unemployment rate was unchanged at 10.0 percent. Employment fell in construction, manufacturing, and wholesale trade, while temporary help services and health care added jobs. (January 8, 2010) |
| Real GDP | U.S. real gross domestic product increased at an annual rate of 2.8 percent in the third quarter of 2009, according to the "second" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP decreased 0.7 percent. (December 24, 2009) |
| Federal Reserve | The FOMC will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. (January 27, 2010) |
[Price indexes are calculated by determining the cost
of a fixed basket of goods. If we were to use the data in question five to
calculate an index similar to the consumer price index, we begin with the
market basket. That market basket is the consumption patterns of 1999. The
cost of that market basket is the sum of the 1999 quantities times the 1999
prices. (1000 x $1.00) + (500 x $8.00) + (400 x $5.00) = $7,000. The cost
of that SAME market basket in 2000 prices is (1000 x $.90) + (500 x $9.00)
+ (400 x $6.00) = $7,800. (Students are likely to have problems thinking about
which market basket to use and which prices to use.)
The 1999 base year index is the cost of the 1999 basket in 1999 prices divided
by the cost of the base year (1999) basket. Or $7,000/$7,000 = 1. However,
it is normally stated as 100. (Simply the index times 100.)
The 2000 year index is the cost of the 1999 basket in year 2000 divided by
the cost of the base year (1999) basket in 1999. Or $7,800/$7,000 = 1.11.
However, it is normally stated as 111. (Simply the index times 100.)
The rate of inflation is found by determining the percentage increase in the
consumer price index between the two years. In this case, it is easy to see.
The annual rate of inflation was 11 percent.]
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