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Macroeconomics Part 2

Macroeconomics Part 2. Jamshed uz Zaman Ref: Dornbusch and Fischer Macroeconomics 6 th Edition. Price Level. Percentage change in Price level is Inflation. Price level can be measured by different ways: GDP Deflator Wholesale Price Index Consumer Price Index

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Macroeconomics Part 2

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  1. Macroeconomics Part 2 Jamshed uz Zaman Ref: Dornbusch and Fischer Macroeconomics 6th Edition

  2. Price Level • Percentage change in Price level is Inflation. • Price level can be measured by different ways: • GDP Deflator • Wholesale Price Index • Consumer Price Index • Cost of Living Index, etc. All indices are prepared by the BBS.

  3. Consumer Price Index • CPI (1995-96 base year) is calculated each month • by the BBS • on the basis of a sample survey conducted on 7420 persons with average monthly expenditure of Tk. 7274. • Weighted average price of the goods in the consumption basket are compared with the same of the base year. • Formula used:

  4. National, Rural and Urban Indices • National index is weighted average index of rural (70.89%) and urban (29.11) sub-indices. • It is also weighted average of Food and Non-food sub-indices. • It is based on a sample survey of 7420 households • With expenditure of Tk. 7274 per month.

  5. Consumer Price Index

  6. GDP Deflator

  7. A Simple Economy • C= consumption • I = Investment • S = Savings

  8. Introducing Government and Foreign Trade • G = purchases of goods and services by government • TA =Taxes • TR = Transfer to private sector • NX = Net exports (exports - imports) • YD = Disposable Income • Y C + I + G + NX • YD Y + TR – TA • YD C + S

  9. Introducing Government and Foreign Trade (Contd) • C + S YD Y + TR – TA • C YD – S Y + TR – TA – S • S – I (G +TR – TA) + NX

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