Chapter 24 Review

Overall I would give this chapter a difficulty rating of 1.5/3. The general idea of the chapter revolves around the CPI, and the CPI, although initially difficult to understand, became easier. The book does a good job of explaining by using the basket example. Also, although there were a few equations (inflation rate and dollar figures from different times) to memorize, it didn't seem to hard to understand, only hard to keep into memory. 

Chapter 24 began by introducing the topic of CPI, also known as consumer price index. It measures the overall cost of the goods and services bought by a typical consumer. The book also discusses the concepts of inflation based on real and nominal interest rates. The book had a very nice way of explaining this, especially with the basket example. 

CPI also fails to account for the introduction of new goods in the market, making the so called basket unreliable as consumers may be interested in purchasing new goods. There are a lot of arguments that CPI overestimates the cost of living, and many are against it, espciailly those of which incomes are based according to CPI. Due to these reasons, the CPI overstates true inflation. Similar to the CPI, the GDP deflator measures the overall level of prices in the economy. 

The nominal interest rate and the real interest rates were re-introduced in this chapter, and they were easy to understand because we learned it last chapter and this concept seemed more familiar.