宏观经济学及财务知识分析规划综合课件

CHAPTER2MeasuringtheMacroeconomy1Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.CHAPTER2MeasuringtheMacroecQuestionsWhatkeydatadomacroeconomistslookat?Howarekeymacroeconomicdataestimatedandcalculated?Whatisthedifferencebetween“nominal”and“real”values?Howarestockmarketvaluesrelatedtointerestrates?2Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.QuestionsWhatkeydatadomacrQuestionsHowareinterestratesrelatedtothepricelevelandtheinflationrate?Howisunemploymentrelatedtototalproduction?Whatisright--andwhatiswrong--withthekeymeasureofeconomicactivity,realGDP?3Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.QuestionsHowareinterestrateTheImportanceofDataEconomistsusequantitativedatatoexamineandunderstandbehaviorpricesquantitiesvaluesDatacanbeusedintwowaysmakequantitativeforecaststesteconomictheories4Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheImportanceofDataEconomisMostImportantMacroeconomicDatarealGDPtheunemploymentratetheinflationratetheinterestratethelevelofthestockmarkettheexchangerate5Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.MostImportantMacroeconomicDTable2.1-TheSixKeyEconomicVariables6Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.Table2.1-TheSixKeyEconomTheExchangeRateThenominalexchangerateistherelativepriceoftwodifferentcurrenciesdeterminedintheforeignexchangemarketExample€1.00equals$1.20$1.00equals€0.837Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheExchangeRateThenominaleTheExchangeRateDomesticexportersearnforeigncurrencywhentheyexportproductsneedtotradetheforeigncurrencyfordollarsForeignproducersearndollarswhenU.S.residentsimporttheirproductsneedtotradethedollarsforforeigncurrency8Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheExchangeRateDomesticexpoFigure2.1-TheMarketforForeignExchange9Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.Figure2.1-TheMarketforFoTheExchangeRateTherealexchangerateisthenominalexchangerateadjustedforchangesinthevalueofthecurrencydependsonthenominalexchangerateandthepricelevel10Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheExchangeRateTherealexchTheExchangeRateExample1nominalexchangeratechangesfrom$1.20=€1.00to$2.40=€1.00priceleveldoublesrealexchangerateisunchangedExample2nominalexchangerateremainsatthesamelevel($1.20=€1.00)priceleveldoublesrealexchangeratefallsbyhalf11Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheExchangeRateExample111CoTheExchangeRateExample3nominalexchangerateincreasesfrom$1.20=€1.00to$2.30=€1.00pricelevelremainsthesamerealexchangeratedoubles12Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheExchangeRateExample312CoTheExchangeRateTocalculatetherealexchangerate(),youneedthreepiecesofinformationpricelevelinthehomecountry(P)pricelevelabroad(P*)nominalexchangerate(e)13Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheExchangeRateTocalculateTheExchangeRateTherearemanydifferentcurrenciesintheworldmanydifferentexchangeratesEconomistsconstructanexchangerateindextorepresent“the”exchangerateeachcountryreceivesaweightequaltoitsshareoftotalU.S.trade14Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheExchangeRateTherearemanTheExchangeRateTheexchangerateindexisbyaveragingeachcountry’scurrentexchangeraterelativetoitsexchangerateinthebaseyear(1992)15Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheExchangeRateTheexchangeFigure2.2-TheExchangeRateIndex,

1992-199816Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.Figure2.2-TheExchangeRateTheStockMarketThemostrepresentativeindexoftheU.S.stockmarketistheStandardandPoor’sCompositeIndex(S&P500)ThemostcommonlydiscussedindexoftheU.S.stockmarketistheDow-JonesIndustrialAverage17Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheStockMarketThemostrepreTheStockMarketStockmarketaveragesareinnominaltermsmustdividebysomemeasureofthepriceleveltogettherealvalueofthestockmarketTherealvalueofthestockmarketisasensitiveindicatoroftherelativeoptimismorpessimismofinvestorscanforecastfutureinvestmentspending18Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheStockMarketStockmarketaTheStockMarketInvestorsfaceachoicebetweenholdingstocksandholdingbondsstocksaresharesofownershipofacorporationentitlesyoutoaportionofthecompany’sprofitsbondsaredebtsthatthecorporationowesyoupaysperiodicinterestpaymentsandreturnsprincipaltoyouatmaturity19Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheStockMarketInvestorsfaceTheStockMarketRatesofreturnforbonds,therateofreturnistheinterestrate(r)forstocks,therateofreturnistheratioofearningspershare(Es)tothepricepaid(Ps)Stocksareriskyinvestorsmayrequireariskpremium(s)20Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheStockMarketRatesofreturTheStockMarketInvestorswillholdonlystocksifInvestorswillholdonlybondsif21Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheStockMarketInvestorswillTheStockMarketInvestorswillholdbothstocksandbondsifThismeansthatthevalueofastockisequalto22Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheStockMarketInvestorswillTheStockMarketHowcanwemeasureEs?newspaperreportswhatthefirm’saccountantshavecalculated(Ea)investorsareinterestedinsomelong-runaverageofexpectedfutureearnings(Es)needanestimateoftherelationshipbetweenEaandEs23Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheStockMarketHowcanwemeaFigure2.3-CalculatingtheValueofa

BasketofStocks24Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.Figure2.3-CalculatingtheVTheStockMarketprovidesinformationonthecurrentlevelofprofits(earnings)whetherinvestorsareoptimisticorpessimisticthecurrentcostofcapitalattitudestowardrisk25Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheStockMarketprovidesinforTheInterestRateisthepriceatwhichpurchasingpowercanbeshiftedfromthefutureintothepresentisnotasinglelumpsum,butanongoingstreamofpaymentsmadeovertimeisaflowvariable26Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheInterestRateisthepriceTheInterestRateThereisalargenumberofdifferentinterestratesthatvarybyriskdurationtaxtreatmentPublishedinterestratesarenominalinterestrates27Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheInterestRateThereisalaFigure2.4-TheRealversustheNominal

InterestRate28Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.Figure2.4-TheRealversustThePriceLevelismostfrequentlymeasuredbytheConsumerPriceIndex(CPI)whichiscalculatedmonthlybytheBureauofLaborStatisticsisanexpenditure-weightedindex29Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.ThePriceLevelismostfrequenTable2.5-CalculatingaPriceIndexforFruit:AnExample30Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.Table2.5-CalculatingaPricTheConsumerPriceIndexPriceindexformula31Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheConsumerPriceIndexPriceTheConsumerPriceIndexInthebaseyear,thepriceindexwillequal10032Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheConsumerPriceIndexIntheTheConsumerPriceIndexInthesubsequentyear,thepriceindexwillequal13833Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheConsumerPriceIndexIntheKindsofIndexNumbersLaspeyresindexusesrelativeexpenditurelevelsinafixedbaseyearasweightsexample:ConsumerPriceIndexPaascheindexusescurrent,variableexpenditurelevelsasweightsexample:GDPdeflator34Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.KindsofIndexNumbersLaspeyreKindsofIndexNumbersAllpriceindicesareimperfecttheLaspeyresindexoverstatestheeffectsofpriceincreasesbasedonafixedmarketbasketdoesnottakeintoaccountthatconsumerssubstituterelativelycheapergoodsforrelativelymoreexpensivegoodswhenpricesrise(substitutionbias)35Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.KindsofIndexNumbersAllpricKindsofIndexNumbersAllpriceindicesareimperfectthePaascheindexunderstatestheeffectsofpriceincreasesdoestakeaccountofsubstitutiondoesnottakeintoaccountthefactthatsubstituteditemsareless-valuedthantheitemstheyreplace36Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.KindsofIndexNumbersAllpricTheInflationRateisameasureoftherateofchangeinthepricelevelovertimeisaflowvariablecanbemeasuredusingdifferentpriceindicesConsumerPriceIndex(CPI)GDPdeflator37Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheInflationRateisameasureFigure2.5-DifferentMeasuresofU.S.Inflation,1960-200038Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.Figure2.5-DifferentMeasureTheUnemploymentRateisthefractionofpeoplewhowantajobarelookingforajobcannotfindajobiscalculatedusingtheCurrentPopulationSurveymonthlysurveybytheBureauofLaborStatistics39Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheUnemploymentRateisthefrTheUnemploymentRateIndividualsareclassifiedintooneoffourcategoriesthosewhoareemployedthosewhoareoutofthelaborforceanddonotwantajobcurrentlythosewhodowantajobcurrently,buthavegivenuplookingforonethosewhodowantajobandarecurrentlylookingforone40Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheUnemploymentRateIndividuaTheUnemploymentRate41Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheUnemploymentRate41CopyrigFigure2.6-TheU.S.UnemploymentRatesince195042Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.Figure2.6-TheU.S.UnemployTheUnemploymentRateisastockvariablemayunderestimatetherealexperienceofunemploymentdiscouragedworkersworkerswhoarepart-timeforeconomicreasonsvarybydemographicgroup43Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheUnemploymentRateisastocFigure2.7-U.S.UnemploymentRatesbyDemographicGroup,1960-200044Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.Figure2.7-U.S.UnemploymentOkun’sLawdescribestherelationshipbetweenunemploymentandoutputintheU.S.impliesthata1percentage-pointfallinunemploymentisassociatedwithanextra2.5percentagepointsofgrowthinrealGDP45Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.Okun’sLawdescribestherelatiFigure2.8-Okun’sLaw46Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.Figure2.8-Okun’sLaw46CopyrRealGDPiscalculatedbyaddingupthevalueofallfinalgoodsandservicesproducedintheeconomyisaflowvariableincludesfinalgoodsandservicespurchasedbyconsumersfirmsthegovernment47Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.RealGDPiscalculatedbyaddinNominalversusRealGDPNominalGDPmeasurescurrentoutputusingcurrent-yearpriceschangesinnominalGDPcanoccurfromchangesineitheroutputorpricesRealGDPmeasurescurrentoutputusingpricesfromabaseyearchangesinrealGDPcanonlyoccurifoutputchanges48Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.NominalversusRealGDPNominalNominalversusRealGDPExample49Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.NominalversusRealGDPExampleBaseYearNominalGDP=$10.00RealGDP=$10.00CurrentYearNominalGDP=$13.10RealGDP=$11.50NominalversusRealGDP50Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.BaseYearNominalversusRealGMoreonGDPIntermediategoodsaregoodssoldtoafirmforuseinfurtherproductionareexcludedfromGDPChangesininventoriesarecountedaspartofinvestmentImputationsaremadeforgoodsandservicesnotsoldthroughmarkets51Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.MoreonGDPIntermediategoods5ComponentsofRealGDP(Y)Consumption(C)Investment(I)residentialstructuresnon-residentialstructuresproducers’durableequipmentchangesinbusinessinventoriesGovernmentpurchases(G)Netexports(NX)52Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.ComponentsofRealGDP(Y)ConsTable2.8-ComponentsofGDP,ThirdQuarterof200053Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.Table2.8-ComponentsofGDP,WhatIsandIsNotinGDPIncludedinGDP(butshouldnotbe)replacementofworn-outorobsoletecapitalgovernmentpurchaseswhichcouldbecountedasintermediategoodsNotincludedinGDP(butshouldbe)householdproductiondepletionofscarcenaturalresources“bads”54Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.WhatIsandIsNotinGDPInclFigure2.9-LaborForceParticipationRates

byGender,1948-199655Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.Figure2.9-LaborForcePartiChapterSummaryBecausegoodsandservicesareboughtandsoldwithpricesattached,economistshavealotofquantitativedatatoworkwithTherealexchangerateistherelativepriceatwhichtwocountries’goodsexchangeforeachothercalculatedbyadjustingthenominalexchangerateforchangesinthepricelevelsofthetwocountries56Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.ChapterSummaryBecausegoodsaChapterSummaryThelevelofthestockmarketreflectsthevariableswhichaffectinvestmentcurrentprofitsinvestors’optimismorpessimismtherealrateofinterestattitudestowardriskTherealinterestrateiscalculatedbysubtractingtheinflationratefromnominalinterestsrates57Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.ChapterSummaryThelevelofthChapterSummaryThemost-commonlyseenmeasureofthepricelevelistheConsumerPriceIndex(CPI)theinflationrateistherateofchangeintheCPIUnemploymentandoutputarelinkedthroughOkun’slawa1percentage-pointdecreaseintheunemploymentrateleadstoa2.5percentincreaseinoutput58Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.ChapterSummaryThemost-commonChapterSummaryRealGDPisthemostcommonly-seenmeasureoftheoveralllevelofeconomicactivitycalculatedusingpricesfromabaseyearWhatisandwhatisnotincludedinGDPistheresultofeconomists’beliefsinthe1940sand1950saboutwhatwouldbepossibletomeasureeasily59Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.ChapterSummaryRealGDPistheCHAPTER2MeasuringtheMacroeconomy60Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.CHAPTER2MeasuringtheMacroecQuestionsWhatkeydatadomacroeconomistslookat?Howarekeymacroeconomicdataestimatedandcalculated?Whatisthedifferencebetween“nominal”and“real”values?Howarestockmarketvaluesrelatedtointerestrates?61Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.QuestionsWhatkeydatadomacrQuestionsHowareinterestratesrelatedtothepricelevelandtheinflationrate?Howisunemploymentrelatedtototalproduction?Whatisright--andwhatiswrong--withthekeymeasureofeconomicactivity,realGDP?62Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.QuestionsHowareinterestrateTheImportanceofDataEconomistsusequantitativedatatoexamineandunderstandbehaviorpricesquantitiesvaluesDatacanbeusedintwowaysmakequantitativeforecaststesteconomictheories63Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheImportanceofDataEconomisMostImportantMacroeconomicDatarealGDPtheunemploymentratetheinflationratetheinterestratethelevelofthestockmarkettheexchangerate64Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.MostImportantMacroeconomicDTable2.1-TheSixKeyEconomicVariables65Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.Table2.1-TheSixKeyEconomTheExchangeRateThenominalexchangerateistherelativepriceoftwodifferentcurrenciesdeterminedintheforeignexchangemarketExample€1.00equals$1.20$1.00equals€0.8366Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheExchangeRateThenominaleTheExchangeRateDomesticexportersearnforeigncurrencywhentheyexportproductsneedtotradetheforeigncurrencyfordollarsForeignproducersearndollarswhenU.S.residentsimporttheirproductsneedtotradethedollarsforforeigncurrency67Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheExchangeRateDomesticexpoFigure2.1-TheMarketforForeignExchange68Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.Figure2.1-TheMarketforFoTheExchangeRateTherealexchangerateisthenominalexchangerateadjustedforchangesinthevalueofthecurrencydependsonthenominalexchangerateandthepricelevel69Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheExchangeRateTherealexchTheExchangeRateExample1nominalexchangeratechangesfrom$1.20=€1.00to$2.40=€1.00priceleveldoublesrealexchangerateisunchangedExample2nominalexchangerateremainsatthesamelevel($1.20=€1.00)priceleveldoublesrealexchangeratefallsbyhalf70Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheExchangeRateExample111CoTheExchangeRateExample3nominalexchangerateincreasesfrom$1.20=€1.00to$2.30=€1.00pricelevelremainsthesamerealexchangeratedoubles71Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheExchangeRateExample312CoTheExchangeRateTocalculatetherealexchangerate(),youneedthreepiecesofinformationpricelevelinthehomecountry(P)pricelevelabroad(P*)nominalexchangerate(e)72Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheExchangeRateTocalculateTheExchangeRateTherearemanydifferentcurrenciesintheworldmanydifferentexchangeratesEconomistsconstructanexchangerateindextorepresent“the”exchangerateeachcountryreceivesaweightequaltoitsshareoftotalU.S.trade73Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheExchangeRateTherearemanTheExchangeRateTheexchangerateindexisbyaveragingeachcountry’scurrentexchangeraterelativetoitsexchangerateinthebaseyear(1992)74Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheExchangeRateTheexchangeFigure2.2-TheExchangeRateIndex,

1992-199875Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.Figure2.2-TheExchangeRateTheStockMarketThemostrepresentativeindexoftheU.S.stockmarketistheStandardandPoor’sCompositeIndex(S&P500)ThemostcommonlydiscussedindexoftheU.S.stockmarketistheDow-JonesIndustrialAverage76Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheStockMarketThemostrepreTheStockMarketStockmarketaveragesareinnominaltermsmustdividebysomemeasureofthepriceleveltogettherealvalueofthestockmarketTherealvalueofthestockmarketisasensitiveindicatoroftherelativeoptimismorpessimismofinvestorscanforecastfutureinvestmentspending77Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheStockMarketStockmarketaTheStockMarketInvestorsfaceachoicebetweenholdingstocksandholdingbondsstocksaresharesofownershipofacorporationentitlesyoutoaportionofthecompany’sprofitsbondsaredebtsthatthecorporationowesyoupaysperiodicinterestpaymentsandreturnsprincipaltoyouatmaturity78Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheStockMarketInvestorsfaceTheStockMarketRatesofreturnforbonds,therateofreturnistheinterestrate(r)forstocks,therateofreturnistheratioofearningspershare(Es)tothepricepaid(Ps)Stocksareriskyinvestorsmayrequireariskpremium(s)79Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheStockMarketRatesofreturTheStockMarketInvestorswillholdonlystocksifInvestorswillholdonlybondsif80Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheStockMarketInvestorswillTheStockMarketInvestorswillholdbothstocksandbondsifThismeansthatthevalueofastockisequalto81Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheStockMarketInvestorswillTheStockMarketHowcanwemeasureEs?newspaperreportswhatthefirm’saccountantshavecalculated(Ea)investorsareinterestedinsomelong-runaverageofexpectedfutureearnings(Es)needanestimateoftherelationshipbetweenEaandEs82Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheStockMarketHowcanwemeaFigure2.3-CalculatingtheValueofa

BasketofStocks83Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.Figure2.3-CalculatingtheVTheStockMarketprovidesinformationonthecurrentlevelofprofits(earnings)whetherinvestorsareoptimisticorpessimisticthecurrentcostofcapitalattitudestowardrisk84Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheStockMarketprovidesinforTheInterestRateisthepriceatwhichpurchasingpowercanbeshiftedfromthefutureintothepresentisnotasinglelumpsum,butanongoingstreamofpaymentsmadeovertimeisaflowvariable85Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheInterestRateisthepriceTheInterestRateThereisalargenumberofdifferentinterestratesthatvarybyriskdurationtaxtreatmentPublishedinterestratesarenominalinterestrates86Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheInterestRateThereisalaFigure2.4-TheRealversustheNominal

InterestRate87Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.Figure2.4-TheRealversustThePriceLevelismostfrequentlymeasuredbytheConsumerPriceIndex(CPI)whichiscalculatedmonthlybytheBureauofLaborStatisticsisanexpenditure-weightedindex88Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.ThePriceLevelismostfrequenTable2.5-CalculatingaPriceIndexforFruit:AnExample89Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.Table2.5-CalculatingaPricTheConsumerPriceIndexPriceindexformula90Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheConsumerPriceIndexPriceTheConsumerPriceIndexInthebaseyear,thepriceindexwillequal10091Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheConsumerPriceIndexIntheTheConsumerPriceIndexInthesubsequentyear,thepriceindexwillequal13892Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheConsumerPriceIndexIntheKindsofIndexNumbersLaspeyresindexusesrelativeexpenditurelevelsinafixedbaseyearasweightsexample:ConsumerPriceIndexPaascheindexusescurrent,variableexpenditurelevelsasweightsexample:GDPdeflator93Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.KindsofIndexNumbersLaspeyreKindsofIndexNumbersAllpriceindicesareimperfecttheLaspeyresindexoverstatestheeffectsofpriceincreasesbasedonafixedmarketbasketdoesnottakeintoaccountthatconsumerssubstituterelativelycheapergoodsforrelativelymoreexpensivegoodswhenpricesrise(substitutionbias)94Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.KindsofIndexNumbersAllpricKindsofIndexNumbersAllpriceindicesareimperfectthePaascheindexunderstatestheeffectsofpriceincreasesdoestakeaccountofsubstitutiondoesnottakeintoaccountthefactthatsubstituteditemsareless-valuedthantheitemstheyreplace95Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.KindsofIndexNumbersAllpricTheInflationRateisameasureoftherateofchangeinthepricelevelovertimeisaflowvariablecanbemeasuredusingdifferentpriceindicesConsumerPriceIndex(CPI)GDPdeflator96Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheInflationRateisameasureFigure2.5-DifferentMeasuresofU.S.Inflation,1960-200097Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.Figure2.5-DifferentMeasureTheUnemploymentRateisthefractionofpeoplewhowantajobarelookingforajobcannotfindajobiscalculatedusingtheCurrentPopulationSurveymonthlysurveybytheBureauofLaborStatistics98Copyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.TheUnemploymentRateisthefrTheUn