Principles of Macroeconomics / Unit 8 MAC 0702 short lesson, about 20 seconds
The Axes of the Model
Captions available
The idea
Real GDP goes on the horizontal axis and the price level on the vertical. The price level is an index, not a rate.
In practice
A price level of one hundred and ten says where prices stand, not how fast they are rising.
Where people slip
The inflation rate is the percentage change in the price level, so a falling inflation rate still means prices are rising.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
Builds on
Something wrong in this lesson? Flag it · Sources for Principles of Macroeconomics