inflation basket

7/28/2019 Inflation Basket

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7PENGUKURAN KOS HIDUP/TARAF HIDUP

(Measuring the Cost of Living )


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TOPIK 7 PENGUKURAN KOS HIDUP 2ECN3100 PRINSIP EKONOMI

THE CONSUMER PRICE

INDEX

The consumer price index (CPI) /Indeks Harga Pengguna (IHP)is a

measure of the overall cost of thegoods and services bought by atypical consumer.


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How the Consumer Price

Index Is Calculated

1. Fix the Basket (menetapkan bakul barangan)


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Index Is Calculated

2. Find the Prices (kenalpasti harga barangan)


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Index Is Calculated

3. Compute the Baskets Cost

(kirakan nilai barangan yang telah dipilih)


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Index Is Calculated

4. Choose a Base Year and Compute the CPI

CPI =cost of basket in current year

cost of basket in base year100


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Index Is Calculated

5. Compute the inflation rate(Kira kadar inflasi)

Inflation Rate in Year 2 = CPI in Year 2 - CPI in Year 1

CPI in Year 1100


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Bakul Barangan CPI MalaysiaKumpulan Barangan Wajaran

Makanan(Food) 33.80

Minuman dan tembakau(Beverages and tobacco)

3.10

Pakaian dan kasut(Clothing and footwear)

3.40

Sewa kasar, bahan api dan kuasa(Gross rent, fuel and power) 22.40

Perabot, hiasan dan perkakas rumah(Furniture, furnishings and household equipment and operation)

5.30

Rawatan perubatan dan perbelanjaan kesihatan(Medical care and health expenses)

1.80

Pengangkutan dan komunikasi(Transport and communication) 18.80

Perkhidmatan rekreasi, hiburan, pelajaran dan kebudayaan(Recreation, entertainment, education and cultural services)

5.90

Pelbagai barang dan perkhidmatan(Miscellaneous goods and services)

5.50


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CPI & Kadar Inflasi Malaysia1970 hingga 2004

Tahun CPI Inflasi Tahun CPI Inflasi

1970 28.8 1.9% 1987 65.0 0.5%

1971 29.3 1.7% 1988 66.6 2.5%

1972 30.3 3.4% 1989 68.5 2.9%

1973 33.5 10.6% 1990 70.6 3.1%

1974 39.3 17.3% 1991 73.6 4.2%

1975 41.1 4.6% 1992 77.1 4.8%

1976 42.1 2.4% 1993 79.9 3.6%

1977 44.2 5.0% 1994 82.8 3.6%

1978 46.3 4.8% 1995 85.7 3.5%

1979 48.0 3.7% 1996 88.7 3.5%

1980 51.2 6.7% 1997 91.0 2.6%

1981 56.2 9.8% 1998 95.8 5.3%1982 59.4 5.7% 1999 98.5 2.8%

1983 61.6 3.7% 2000 100.0 1.5%

1984 64.1 4.1% 2001 101.4 1.4%

1985 64.3 0.3% 2002 103.2 1.8%

1986 64.7 0.6% 2003 104.4 1.2%2004 105.9 1.4%


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Kadar Inflasi Malaysia1970 hingga 2004

Tahun

0.00%

2.00%4.00%

6.00%

8.00%

10.00%

12.00%14.00%

16.00%

18.00%

20.00%

Peratus


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Jenis-Jenis Inflasi1. Inflasi Sederhana

2. Inflasi Merayap

3. Inflasi Melampau

4. Inflasi Tertekan


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Sebab-Sebab Inflasi1. Inflasi Tarikan Permintaan

2. Inflasi Tolakan Kos

3. Inflasi Import

4. Inflasi Struktur


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Problems in Measuring the

Cost of Living

Substitution bias

Introduction of new goods

Unmeasured quality changes


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The GDP Deflator versus

the Consumer Price Index

The GDP deflatorreflects the pricesof all goods and servicesproduced

domestically, whereas...

the consumer priceindexreflects

the prices of all goods and servicesbought by consumers.


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The GDP Deflator versus

the Consumer Price Index

The consumer price indexcompares theprice of a fixed basketof goods andservices to the price of the basket in thebase year

whereas the GDP deflatorcompares the

price of currently producedgoods andservices to the price of the same goodsand services in the base year.


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Figure 2 Two Measures of Inflation

1965

Percent

per Year15

CPI

GDP deflator

10

5

0

1970 1975 1980 1985 1990 20001995

Copyright2004 South-Western


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CORRECTING ECONOMICVARIABLES FOR THE

EFFECTS OF INFLATION

Price indexes are used to correct for

the effects of inflation whencomparing dollar figures fromdifferent times.


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Dollar Figures from Different

Times

Do the following to convert (inflate)Babe Ruths wages in 1931 to dollars

in 2001:Salary Salary

Price level in 2001

Price level in 19312001 1931

$80,.

$931,

000 177152

579


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Real and Nominal Interest

Rates

The nominal interestrate is the interestrate usually reported and not correctedfor inflation.

The real interest rateis the nominalinterest rate that is corrected for theeffects of inflation.


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Real and Nominal Interest

Rates

You borrowed $1,000 for one year.

Nominal interest rate was 15%.

During the year inflation was 10%.Real interest rate

= Nominal interest rateInflation

=15% - 10% = 5%


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Figure 3 Real and Nominal Interest Rates

1965

Interest Rates

(percent

per year)

15

Real interest rate

10

5

0

51970 1975 1980 1985 1990 1995 2000

Nominal interest rate

Copyright2004 South-Western


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Summary The consumer price index shows the cost of a basket of

goods and services relative to the cost of the same basketin the base year.

The index is used to measure the overall level of prices inthe economy.

The percentage change in the CPI measures the inflation

rate. The consumer price index is an imperfect measure of thecost of living for the following three reasons: substitutionbias, the introduction of new goods, and unmeasuredchanges in quality.

Because of measurement problems, the CPI overstatesannual inflation by about 1 percentage point.


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Summary The GDP deflator differs from the CPI because it includes

goods and services produced rather than goods and servicesconsumed.

In addition, the CPI uses a fixed basket of goods, while theGDP deflator automatically changes the group of goods andservices over time as the composition of GDP changes.

Dollar figures from different points in time do notrepresent a valid comparison of purchasing power.

Various laws and private contracts use price indexes tocorrect for the effects of inflation.

The real interest rate equals the nominal interest rateminus the rate of inflation.

inflation basket

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