Base year

-this is the year with which the values from other years are compared. And might also be called
reference year.

-One major factor considered in the choices of the base year is a "normal"year or a "typical" year

Price Index Numbers

Three types of price index numbers namely:

1.Price Relative

2.Unweighted Priced Index

A.Simple Aggregate Price index

B.Average of price relatives

3.Weighted Price Index

A.Laspetres Index

B.Paasche Index

Price relative

-the ratio of the price of a certain commodity in a given period to its price in an earlier fixed period
called the base period or reference period expressed as a percentage.

The unweighted Price Index

Formula for the SIMPLE AGGREGATIVE PRICE INDEX IS:

Average of the price relatives:

Formula of average price relatives

WEIGHTED PRICE INDEX NUMBERS

-in weighted index numbers, the quantity of each commodity enters the computations.Thus eliminates
the dis advantage of an inweighted index numbers.

MEASURES TO CURB INFLATION

Two methods to controlled inflation

A.monetary policy

- is the province of the bangko sentral or the monetary authority

Bangko sentral has several tools of policy which it may use to control money supply

1.exercise of fiat authority to ussue paper money

2.control of the banks reserve requirements

3.use of the discount or (rediscount policy)

4.use of open market operations

5.selective credit controls and

6.use moral suasion.

B.fiscal pilicy

Fiscal policy concerned is with the utilitization of public expemditire,taxation and public debt so as to
achieve desired economic objevtives.