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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

Why do economists use index numbers to measure the price level rather than dollar value of goods?

To determine

The reason behind economists using index numbers to measure the price level rather than dollar value of goods.

Explanation

To measure price level a basket of goods and services is constructed (hypothetical), which means a set of consumer purchases is considered. Any increase in the prices of the goods of the basket is calculated over time. A much simpler way of interpreting the price levels for more complex and realistic baskets of goods, is to calculate the price variations as an index number. Index number is a unit free number used in calculation instead of the dollar value of the basket...

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