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Living Cost - Coggle Diagram

- - - - Compute the inflation rate: The inflation rate is the percentage change in the price index from the preceding period.
      - Always use the same reference base period for all calculations.
- - - - Prices of an apple, a slice of cheese cake and a cup of coffee are RM1, RM18 and RM2 respectively. The average price is RM7.
- - - - The GDP deflator reflects the prices of all goods and services produced domestically while the CPI reflects the prices of a basket of goods and services bought by consumers.
        
        GDP deflator – a broader measure
        
        CPI- a narrower index.
  - - - When some dollar amount is automatically corrected for inflation by law or contract, the amount is said to be indexed for inflation.
    - - Interest represents a payment in the future for a transfer of money in the past.
      - The nominal interest rate is the interest rate usually reported and not corrected for inflation.
        
        It is the interest rate that a bank pays.
      - The real interest rate is the nominal interest rate that is corrected for the effects of inflation.