Questions tagged [price-level]

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how to adjust price data due to clock changes?

I'm trying to analyze the hourly price variation of the electricity market. However, because of clock changes, due to daylight saving time, we have a missing hour in March and an additional hour in ...
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Understanding nominal and real prices from Wealth of Nations

Here is an excerpt from Wealth of Nations: Princes and sovereign states have frequently fancied that they had a temporary interest to diminish the quantity of pure metal contained in their ...
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Question About Consumer Price Index (CPI)

So my question is regarding how a change in consumer buying behavior affects the CPI. Say for example, that in times of crisis people tend to buy their goods from shops with cheaper prices than the ...
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Considering existence of firms with sticky prices of goods, why are we sure that SRAS will be upward slopping?

One of theories that explains why the SRAS is upward slopping is the theory of sticky prices. For an example, suppose there is inflation. In the short run it will take different time for firms to ...
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1answer
30 views

How will economy find long-term equilibrium in AD-AS model in case of a negative supply shock?

Let's suppose that negative supply shock happened that affected SRAS, but not LRAS. Let's also assume that previously there was long-run equilibrium at point $A$. Due to negative supply shock SRAS ...
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20 views

Why doesn't AD curve self-correct to higher price level in LR?

In textbooks it is usually taught that once actual price level is higher than expected, short-run aggregate supply will eventually shift up so that new expected price level is closer to the actual ...
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1answer
74 views

A hypothetical question on neutrality of money

Let's assume that we start with an economy producing two goods, A and B, with each priced $100. Each good is weighted using the same quantity, so CPI equals 100. Nominal wage is also 100 dollars. An ...
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Data for CGE experiments?

Does anyone know of any open-source U.S. data sets in a format appropriate to whole-economy CGE econometric modeling, i.e. data sets covering the entire economy, divided into at least 20 sectors, with ...
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1answer
33 views

Puzzle: Fairness of consumer price indices

I have learned a bit how the consumer price index (= inflation rate) in Germany is calculated. It's a complex process, which takes into account a lot of measured values (mainly specific prices for ...
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1answer
64 views

Basic New Keynesian Model - Price and Wage Level after shock

I'm currently solving a new Keynesian model with government spending. It's the basic model version, with constant returns to scale on the only production factor work. Everything has worked out fine ...
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1answer
34 views

Real exchange rate of India and United State?

According to OECD the price level of India is 29, and that of united states is 113, and nominal exchange rate is 64-1(INR-$). So what is the real exchange rate? Is it $$RER = NER\times\frac{US_{...
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120 views

Effects of long run stability in U.S price level comparing to other countries on net export

Suppose the United States experiences a long period of relatively stable prices while other countries experience long periods of inflation. How will this affect U.S. net exports? I think that if U.S ...
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376 views

Price Level and Value of money

When the price level increases in the economy, we generally know that the value of money decreases. However, what is the definition of money here? Is it just currency? Or does it include assets, ...
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132 views

Why are imported Chinese products in India cheaper than those locally produced?

Why an imported Chinese product in India is cheaper compared to a locally manufactured item?
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1answer
102 views

Difference between chained CPI and normal CPI in simple terms

I am taking a community college level intro to macro course, and while self-studying the text, I came across the concept of C-CPI or chained CPI. While I feel I have a grasp as to what CPI is, I have ...
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128 views

Inflation , Housing Prices, Is there some form of the CPI that can include Home Prices?

I understand why we don't include real estate in the CPI. It makes sense, when it is explained to me. I also understand Rent is included in the CPI. However? I live in Canada . Our Populations ...
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2answers
108 views

Why are prices considered the best information we could have?

We often talk about information as pricing being the best information or reflection of different aggregate pieces of information existing on markets. Why do we then also often hear that some prices do ...
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1answer
66 views

Causality: Money supply and prices

When there is an increase in price level, real money supply decreases and raises interest rates. In a similar situation, when money supply decreases, interest rates increases, consumption decreases, ...
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2answers
2k views

Does non-binding price ceiling effect the market? [closed]

If the Price of a commodity is 1 dollar and this price is the equilibrium price. At this price, the quantity demanded & supplied is 100(KGs). If government sets the price ceiling of 10 dollars, ...
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1answer
483 views

Real Exchange Rates calculation

I am struggling with something as simple as real exchange rate calculation! I get the theory: RER = NOM * (P*/P) i.e. nominal exchange rate times price level ratios. Apparently, using CPI (consumer ...
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281 views

What are the relationships between price stability and long term economic growth?

I was wondering what the links are between price stability and economic growth on the long term.
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3k views

Why does the Brexit cause a fall in crude oil prices?

Oil prices have also fallen sharply in the wake of the referendum outcome, with Brent crude down 5.2%. The price of Brent crude fell by \$2.68 to \$48.24 a barrel, its biggest fall since February. ...
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1answer
292 views

What is autocorrelation of prices?

In my econometrics and economics classes, the term autocorrelation has come up this quarter. I have read the Wikipedia pages about it and tried to understand them, but they are a bit beyond me. They ...
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1answer
158 views

Why does an increase in money cause a proportionate increase in price level according to classical/neoclassical economists?

First I am not sure what classical economists say but doesn't increase in Money supply decreases interest rate and cause investment to expand and thus GDP rises. Therefore the aggregate demand ...
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569 views

Significance of Y-axis in Aggregate Supply curve (AD-AS model)

This question is considering an AD-AS model, with Price on the Y-axis and Real GDP on the X axis. The AS is composed of the Keynesian (horizontal), intermediate (upward sloping) and classical (...
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3k views

What kind of policy is minimum wage?

Does it fall under fiscal, monetary, or supply-side, or perhaps some other group? Also (seeing as minimum wage is a form of price control policy), where does the broader "price control policy" fall?
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References about market sampling

Suppose the government wants to determine the efficient price of a certain commodity for which there is no competitive market. One way to do this is to take a sample of the potential buyers and ask ...
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1answer
554 views

Flat AD curve - policy effects

Suppose the AD curve is relatively flat because the Fed wants a stable price level. Which policy (monetary or fiscal) is ineffective?
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1answer
337 views

Change in price and income using the Slutsky equation

Quantity bought is given by $$ q(m,p) = 0.02 m - 2 p $$ where $q$ is number of bottles bought, $m$ is income and $p$ is price per bottle. If income is $m = 7500$ and price is $p = 30$, the number of ...
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1answer
100 views

Inverting price functions and their conditions/intervals

If I have demand functions For $P<15$: $$ Q(P) = 700-40P $$ For $P>15$: $$ Q(P) = 400-20P $$ If I invert them, I get the price functions For $Q<100$: $$ P(Q)=20 - (1/20)Q $$ For $Q>...
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441 views

Macroeconomics - Fiscal/Monetary Policy and the Price level

I was studying for my macroeconomics test by solving test banks and I came upon this question which has been really bugging me. To decrease the price level A.the Fed could buy bonds and the ...
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3answers
152 views

Does the Fed use misinformation as a tool for good monetary policy?

The Congress established the statutory objectives for monetary policy-- maximum employment, stable prices, and moderate long-term interest rates --in the Federal Reserve Act. http://www....
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1answer
219 views

Why did the price level of government consumption increase in the United States?

From The Penn World Tables (PWT7): Before 1970, the price levels of the three GDP components had been going in parallel. In the late 60s, the price level of government consumption went up (the Nixon ...
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438 views

Why doesn't the price of gold drop as mining occurs that produces more gold?

According to my common knowledge, the price should drop when supply increases. Why doesn't the price of gold drop slowly as more gold is produced from mining?
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1answer
66 views

Why can't price level be negatively correlated with money demand?

Source: p 585, Economics, 3 Ed, 2014, by NG Mankiw, MP Taylor Although many variables affect the demand for money, one variable stands out in importance: the average level of prices in the ...
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2answers
58 views

Is Price Level equivalent to Inflation when looking at AD/AS and Phillips Curve graphs?

Fairly straight forward, Can I assume that Price Level and Inflation are interchangeable when looking at these graphs together? Generally, are they equivalent in Macroeconomics?
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340 views

What determines the exchange rate of two fiat currencies if the supply of each is known?

In this blog post, economist Steve Landsburg posed a question about the value of Bitcoin which he didn't know the answer to. Imagine a future in which Bitcoins (or some other non-governmental ...
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679 views

Oil Price Chart Scale

I found the axis on the following graph of crude oil prices over 1950-2015 from MacroTrends surprising. The y-axis labels are 20, 40, 60, 80, 100, ...but they are not equidistant. Why?
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Decreasing consumption prices and increasing housing prices

It's election time in my country. The government boasts a decrease of 5% in consumption prices thanks to removing regulations, while the opposition blames the government for an increase of 5% in ...
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3k views

Does Inflation Make Money Eventually Worthless?

I used this calculator: http://www.buyupside.com/calculators/inflationjan08.htm to estimate the future worth of 100 dollars in 100 years at 2% inflation. Does this really mean that a decent meal at a ...
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1k views

Price Elasticity of Demand for Positive Price Increases

What does it mean when the price elasticity of demand %Qd/%P is greater than one? Typically I hear that it means the demand is elastic since if, say, the price decreases by 1% the demand for the ...
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184 views

When would prices increase according to Malthusianism?

Malthusians and Neo-Malthusians believe that, eventually, the population of the earth will be exceed the number of people able to be sustained by the earth's food production. As such, they advocated ...
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610 views

What benefits do OPEC countries obtain by cutting oil supply?

It is unclear to a economic novice like me why OPEC is not cutting down production and raising oil prices. I have read several journalists commenting upon this on the internet but perhaps an economist ...
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3answers
2k views

Analysis of free goods

The normal supply and demand models take the supply and demand of a particular good and show that the equilibrium price is where the two curves intersect. At this point, all the people below the ...
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700 views

What is the impact of fracking on oil prices?

I read an article about the recent fall of gas prices in the US claiming that the fall in gas prices was due to the expansion of fracking within the US. The article said that, over the past few ...
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From an economics perspective, what are the ramifications of a currency with fixed money supply?

I'm thinking specifically of bitcoins. What are the pros and cons of having a fixed number of coins, as opposed to more "normal" currencies? Would the currency have no inflation?