inflation
inflation questions and answers
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Q: How will the future inflation from the trillions being printed affect the market in the future?
In your opinion, how will the inflation from the trillions of dollars that the government is printing "out of thin air" affect the market in the future?
Where do you think those trillions that they are bailing out companies with will come from?
That money will eventually be circulated or at least a part of will.
The treasury bonds they sell to foreign countries with interest are bad enough since the government is completely broke and probably will never be able to pay them back for the loans.
A: Your assertion that the government is printing trillions out of thin air is not supported by the most recent money supply reports.Perhaps you're speculating that they will.
Q: How do you calculate inflation? And how else can you calculate it?
Here's a quote from an AP story: "Crude prices are near inflation-adjusted highs hit in early 1980. Depending on the how the adjustment is calculated, $38 a barrel then would be worth $96 to $101 or more today." So what different inflation adjustment methods would make 1980s crude worth $96 or $101 or more? What are the different ways to calculate inflation?
A: There are a few ways to measure inflation in general. One thing you'll see often is the Consumer Price Index - this has the advantage of being widely applicable but has the disadvantage that it's been measuring the prices of the same goods over the years, not accounting for shifts in consumption behavior. The same can be said for the Producer Price Index which measures the cost of raw materials faced by producers. These indices take a fixed basket of goods (or raw materials) and compare their prices to different time periods.
The GDP deflator ((nominal GDP/Real GDP) * 100) on the other hand measures all final goods produced in an economy and thus measures up-to-date consumption/production behavior. Some items are also "seasonally-adjusted" to mitigate expected cost increases that are cyclical versus an actual change in the economy.
There are other ways to measure inflation but these two are the most popular. The CPI and GDP Deflator may not vary all that much in practice.
I'd like to know what methods the article had in mind, outside of these, if any.
Q: Why does inflation make nominal GDP a poor measure of the increase in total production from one year to next?
Why does inflation make nominal GDP a poor measure of the increase in total production from one year to the next?
How does the U.S. Bureau of Economic Analysis deal with the problem inflation causes with nominal GDP?
A: nominal GDP is gdp w/o adjustments for inflation. this, when by itself, can make it seem as if there is economic growth when that is not the case.
the BEA incorporates adjustments for inflation to combat this.
Q: What is a suitable index to measure wage inflation in the construction industry please?
Traditionally people like the idea of RPI, but with construction wage inflation running 2.5 times higher than RPI at present it isn’t exactly the best. (Currently wage inflation is at about 7.5 – 8%, whereas RPI is somewhere between 3 and 4%.)
Any ideas??
Also...does anyone know where I can find official data re: this, e.g. is there a rate published by the National Office of Statistics?
Ta very much!
A: Huh?
Q: What kind of gas or inflation technique offers the longest buoyancy for a balloon?
I'm organizing a nice little party, and a balloon display is something that is desired by some other people helping out. However, I don't want to setup balloons in advance then have them all dead on the floor when guests arrive.
So again, what type of gas or inflation technique should I use in order to keep the balloons buoyant for the longest period of time?
A: Actually
on wikipedia
Q: Has your salary raise covered inflation during the last five years?
I have been falling behind financially and have a lower standard of living since the year 2000. I am always getting the maximum raise (4%), but have figured out the real inflation rate for me is about 7% a year. So my standard of living is one quarter less than it was in the year 2000.
The result is I have less money for fun, investment and savings for retirement. Is this common?
A: yes..inflation reduce money's purchasing power. so is common that u have less money for fun,investment and savings for retirement.for example, you save $10,000 for your retirement,because of inflation,maybe your $10,000 value will be decrease in future.inflation benefit flexible income's person,no fixed salaries person.
Q: What was the annual rate of inflation reported for the month of August 2008 in the United States?
What was the annual rate of inflation reported for the month of August 2008 in the U.S. and where can I find information like this?
I am looking for the annual rate of inflation for the United States from August 2008.
A: US inflation (based on a change in the consumer price index) according to the Bureau of Labor Statistics from August 2007 to August 2008 is 5.4%
Q: What is contained in the virtual shopping basket in calculating the inflation rate in the UK?
The official rate of inflation has just increased to 3%, but anybody filling their shopping trolley, paying household bills, running a car or taking public transport will consider this low rate a figment of someone's imagination. In light of this, I can only imagine the virtual shopping basket contains PCs, DVD players, big screen TVs, MP3 players and digital cameras.
Can anybody shed any light on this?
A: I don't know the exact list, but it contains many, many different items. The list is revised every few years so that yes, it most probably does contain items like PCs and digital cameras now - and it has had items deleted which are no longer relevant (in the 1950s it used to contain a pound of lard!).
It contains mainly groceries and consumer goods. I believe petrol is included, but household bills and so on are not.
You should be able to google it to find out - I remember reading it in Metro either last year or the year before, so I don't believe it's some big state secret.
Q: How to calculate inflation rate against personal pay rise?
Lets say that I'm being paid USD1000 and the current national inflation rate is 5%, how do I calculate the increment so that I get a raise to sustain the inflation rate.
A: You need to also be concerned with the Consumer Price Index as well. There is a simple mathematical rule..over any period, the percentage change in a real value is approximately equal to the pecentage change in the associated nominal value minus the percentage change in the price level.
In other words if the inflation rate is 5 percent and the real wage is to rise by 2 percent (nominal wage divided by CPI for that year multiplied by 100), then the change in the nominal wage would be [2 percent = nominal - 5%] which is 7%.
Then, the required nominal wage rate would be a 7% wage hike. Remember that the real benefit is actual purchasing power. So, as long as your raise is consistent with the CPI, you will not lose purchasing power.
So, if you do like everyone else, just hope that your raise equals the inflation rate.
Good luck!
Q: What would be some good investments if inflation continues to be a factor in the market?
Is there any group of stocks that only exell in Inflation or would cyclical stocks be a good Idea.
A: A lot of people have touted gold as a good thing to buy when there's considerable inflation to worry about. However, the easiest way to buy gold is to buy the GLD ETF, which directly tracks the price of gold. It is extremely liquid, meaning you can buy and sell whenever you want to, unlike buying actual gold bars, where if you wanted to sell them you'd have to physically take them to a dealer or something. You also don't take on the risk as you would of buying stock in a gold company. There are lots of things specific to a company that can go wrong - a mine gets flooded, workers go on strike, etc. that can take a stock down, and those don't have anything to do with the price of gold.
Inflation = GLD.
Q: How are lenders and borrowers affected as inflation rates change and they attempt to protect their purchasing?
How are lenders and borrowers affected as inflation rates change and they attempt to protect their purchasing power?
A: Inflation lowers the value of the dollar which weakens the economy but the government can stimulate the economy by lowering interest rates. By lowering the interest rates borrowing and lending is made easier and more appealing. However, this does have repercussions since as we have seen recently...people buy more than they can afford and have their homes foreclosed on. This creates more of a strain on the economy and doesn't really protect anyone.
Q: (Australian context) How do interest rates affect inflation in this day and age?
I really don't get this. At the moment, most inflation is directly or indirectly related to the price of fuel. Many people do not have mortgages and have enough money to support themselves without using credit.
How can the reserve bank continue to assume that interest rates will control inflation when, rate rise after rate rise, price inflation seems to continue?
A: It is precisely because oil (an import) is so important to overall inflation that the interest rate helps control it. When a national reserve bank raises its interest rate, the currency becomes more expensive, and this helps keep imports, like oil, cheaper.
The price of oil is denominated in US dollars, and the US is keeping its interest low, so these policies complement one another. A drop in interest rates in Australia or a rise in interest rates in the US would make Australia's imported oil, and therefore everything else, more expensive.
A high interest rate hurts people who do have mortgages or need other credit, so that could be another reason why a high interest rate isn't such a bad policy in Australia's case. Everything would be different if Australia was exporting lots of goods and producing most of its own oil. Then you would want to lower interest rates to keep boosting production and keep your exchange rate low for foreign buyers.
Q: What effects inflation is putting on Indian economy?
Recent news is there. Everybody are talking about high inflation. I just want to know how exactly it is effecting to the economy.
A: Inflation is ‘persistent increases in the general level of prices’ measured against a standard level of purchasing power. This measure is provided by the Wholesale Price Index (WPI) or Consumer Price Index (CPI) which measures the nominal changes in prices. GDP deflator, another metric, also measures inflation but in term of new products and services created. It devalues the worth of money. Inflation is a recurring phenomenon but only intermittently. A crucial feature of inflation is that price rises are sustained.
Causes
1. Caused by excess demand in the economy (Demand-Pull Inflation)
2. Caused by high costs (Cost-Push Inflation)
3. Caused by excessive increase in money supply (Monetarism).
4. Built-in-inflation caused by adaptive expectations (Price/ Wage spiral)
In the long run, inflation is a monetary phenomenon. In the short and medium term it is influenced by the relative elasticity of wages, prices and interest rates. The causes often amount to the same thing. Living beyond the nation’s means. Too much money chasing too few goods. Inflation-unemployment trade off in the short run-Philips Curve.
A small inflation rate is viewed positively, as it gives investing incentive.
Effects: Along with the general increase in prices, prices of raw materials, intermediate products, capital goods, factors of production etc. also go up rising capital goods prices would necessitate larger retained earnings by business. Firms may declare lower dividends (for a given level of profit). Competitive position of firms eroded. Product price increases become inevitable which may lead to decline in demand (Depends On price elasticity of demand for the product). Other macro variables affected are rate of interest, exports, exchange rate (of currencies) & future expectations.
Effects of Inflation:
o Increasing uncertainty may discourage investment and saving
o Redistribution
+ It will redistribute income from those on fixed incomes such as pensioners and shifts it those who draw a variable income (say from profits)
o Redistribution of wealth from lenders to borrowers-government is a net debtor and therefore inflation benefits government debts-hence inflation is considered as a ‘hidden tax’
o International Trade: If the rate of inflation in a country is higher than what obtains abroad, a fixed exchange rate will be undermine through a weakening of the balance of trade.
o Shoe Lather Costs: Because the value of cash is eroded by inflation, people will tend to hold less cash during times of inflation (reference to increase trips of customers to banks wear and tear to the shoes!)
o Menu Costs: Firms must change their prices more frequently which imposes costs (restaurants having to reprint manus often to reflect higher prices.)
o Relative price distortion (between companies): Economic discussions will be distorted as relative prices (some firms pushing up prices because of in elasticity of demand while others forced to keep prices stable because of elasticity of demand) don’t reflect relative scarcity of different goods.
Effect depends on the speed of inflation and the nature of the economy.
Impact on Household Sector: inflation directly reduces the purchasing power of the household sector-first, non-essential/ luxury exp. cut-real income falls- expenses on some essentials also cut-lower standard of living-cash saving discouraged, stocking physical goods (gold)-fixed income groups suffer the most-Sectors where income is related to prices (businessman) not affected in the short run.
Impact on Business Sector: Moderate inflation (2-3%) good, initially-Firms benefit from rising prices. Soon, demand falls as consumers reduce consumption. Fall different for different commodities depending on the price elasticity of demand. Production costs go up, especially if wages are linked to inflation index-Costs increase, squeezes profits. Remedy: cost cutting and efficiency building, New investment risky, realigned to shift in consumer patterns-Govt. policies important-Competitive environment changes-composition of industrial outputs change. Some firms make profits-Competitiveness in exports affected and possibility of depreciation and rise in costs of imported raw materials.
Impact on Debtors and Creditors: Redistribution of income from creditors to debtors-repaid debt in depreciated value as purchasing power has eroded to the extent of inflation.
Impact on Govt.: Govt. expense goes up in tandem with increase in price level-austerity measures. Fiscal defict (gap between govt. revence and exp.). Induction of more currency (to cut-deficit) may worsen inflatory pressures. Govt. may initiate restrictive policies wage freeze, tight money policy (higher interest rate) etc.
Q: How does inflation effect the cost of living in a particular country? Does low inflation mean expensive prices
I am trying to understand inflation in relation to the price of living in a country. Britain is regarded as an expensive country but we have low inflation. What about Australia? Their cost of living is less, and they have low inlfation... I need help! This is for an assignment!
A: Inflation can be thought of as the change in the cost of living. So low inflation can be consistent with a relatively high level in the cost of living.
The level of the cost of living has to be referenced to something to get any meaning. If you want to compare the cost of living across countries then you need to compare the cost of a basket of goods and services in a common currency. See if you can find a reference to the 'Big Mac Index' to compare the cost of a burger!
The problem in such calculations is the exchange rate between currencies of different countries. Because sterling is quite strong, the UK seems an expensive place relative to many other countries. Although much of the euro area is more expensive than the UK.
And then the true cost of living depends on earnings too. China may be cheap for someone from the UK but not so cheap for someone doing the same job in China.
By the way, dont confuse the cost of living in London with the that of the UK. London is much more expensive for most things than most other cities in the UK - just compare beer prices!!
Q: What Is Inflation-And How Does It Affect Our Economy?
Today 16 Jan 07 the Government put up our inflation rate to a eleven year high.
What is inflation? (I know it effects our everyday purchases)
What is the purpose of inflation?
Thank you
A: If you have ten pounds and kept it under your mattress for a year you will find out that you can buy less things with the same ten pounds note. That is because prices went up.
The current rate of inflation is around 2 % that mean that you need to make an extra 2 % a year more money to maintain your living standard.
Interest rate has to be above the rate of inflation other wise you are not making any money if you leave your money in the bank. There is no real purpose of inflation it just happens because there is an increase in the money supply. For example if the Bank of England decides to print an Extra billion pounds for no reason the actual value of the pound will go down. This is exactly what happened in Russia i think in 1998.
The government does not make the rate of inflation, it just try to keep it low.
I think you are confusing interest rate with inflation!
I hope that i explained it clearly.