English for Business Studies

How come that''s what they taught you? They taught you inflation rate is measured by the growth rate of GDP deflator but did not tell you what is GDP deflator? If so, it makes no sense to you since after all, you dont know how to calculate inflation rate.
There are two main measures of inflation. One way is through GDP inflator and the other is through consumer price index (CPI). GDP deflator is the ratio of nominal GDP over real GDP. Nominal GDP is GDP measured at current price, that is the sum of products of quantities and current prices of all goods and services produced in the period (1 year). Real GDP is calculated by same way where prices at the base year replace current prices. In a nutshell, GDP deflator measures the difference in price between current year and the base year.
I''ll talk about CPI later today, when i have time to type it

Calculation of inflation is not simply CPI. Inflation depends on assumptions you make, involves in many complex stuffs like price level, expected inflation rate, money demand and supply...

maple_leaf: We are talking about Macroeconomics theorically here. However, if you know for sure how Inflation is measured practically in relatily, we''d love to know
What I meant was about the Deflation thing, they did not teach me that.
GDP Price Deflator tells us the rise in Norminal GDP that is attributable to a rise in prices and it''s equal to Nominal GDP devided by Real GDP just like you said.
To continue with CPI as you seem pretty busy and I''m on break
CPI (Consumer Price Index) equals the cost in today''s prices divided by the cost in base year times 100
The main difference between these two is that CPI measures the change in price of a given basket of goods and services. GDP Price deflator measures the cost of a changing basket[i/] of goods.
GDP deflator includes only goods produced domestically. Imported goods are not part of GDP and thus do not show up in the GDP deflator.
Do you have anything else to add? or to eliminate

Sorry, I dont really understand what you wrote. I guess you talked about what determine inflation, not the measure of inflation itself. Whether you agree or not, the fact is that we (Vietnam) is now using CPI as an indicator of inflation.
CPI is calculated based on a rather discretionary basket and weights of basket components. Both CPI and GDP deflator are only approximate of inflation

huhu, mom ui!
My topic is turned into discussion and ...agrument, hix.
Anyway, I also want to take a part. The most impressive part when I studied about Unemployment and Inflation was the relationship between them. There''s a certain relationship expressed as the Phillips Curve so that people could predict the rate of inflation and unemployment.The curve sloped down from left to right and seemed to offer policymakers a simple choice - you have to accept inflation or unemployment. You can''t lower both. ....However, in the 1970s, the curve began to break down as the economy suffered from unemployment and inflation rising together (stagflation). This caused the government many problems and economists struggled to explain the situation. One of the most convincing explanations came from Milton Friedman - a Monetarist economist. He developed a variation on the original Phillips Curve called the expectations-augmented Phillips Curve.
Well, it''s the only part I still remember ''cos I... learnt it by heart to make a presentation.
Hm, I think I should share with you this website, it may be useful for you:
http://www.bized.ac.uk

interesting that Vietnam is using CPI as the inflation measurement tool! thanks
We have have talked about the definition and measurement of inflation. Now we may want to look at the costs of inflation, how each of them affects people.
I know that Shoe Leather Costs is a welknown one and of course everybody must know the Tax Disortions cost. What are other costs of inflation and who gains who looses?
Shoe Leather Costs: As the money looses it value, people rather keep money in the bank. Eventually they will have to make more trips and banking transactions. This is very time consuming.
Tax Disortions: Inflation tends to raise the tax burden on income earned from saving.
Regarding the Philips Curve, far as I know this curve illustrates the INVERSE relationship between the unemployment rate and the rate of inflation; decrease in the inflation rate is associated with increase in unemployments and vice versa, increase in the inflation rate is associated with decrease in unemployment
There is a reason behind this, I really don''t want to go that deep but it has something to do with Agrgregate Demand and the Short Run Aggregate Supply curves and the Demand-Pull inflation.
There are also two major reasons suggested for the breakdown of the simple Phillips Curve since the early 1970s. If anybody''s interested let me know.
Được vi_cam sửa chữa / chuyển vào 17:00 ngày 24/01/2006