#QUESTION 1

a.Write the definitions or brief descriptions of the three major measures of the price level which are: the GDP deflator; the consumer price index (CPI); and the producer price index (PPI).

b.Write the formula for at least two of the major measures of the price level.

#QUESTION 2

List two potential biases that exist in calculating the consumer price index and steps that the Australian Bureau of Statistics (or the Bureau of statistics from your country) takes to reduce the size of the biases.

Question 3

a.Briefly discuss the changes shown in Figure 2 and Figure 3. List one factor that may cause the shift in each diagram and briefly explain the transmission mechanism.

b.What are the five main determinants of consumption spending? Which of these is the most important? How would a rise in share prices or housing prices affect consumption spending?