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Finance & Accounting
Pages 3 (753 words)
Name Course Tutor Date Inflation This is a very crucial term when talking about monetary issues. This is so because it is a phenomenon that affects money-related issues every now and then. Before going any further it is of essence to understand first what the term refers to.
It is of importance to know that the concept of inflation is just not something that came about the other day but in actual sense it has been there for quite some time now and this fact is documented throught the economic history. The common measure of the extent of inflation is the Consumer Price Index which is used to measure the general increase and decrease in the prices of consumer goods and services. Over the years there has been several attempts of trying to come up with ways through which inflation can be measured. In the present day it is quite fascinating to report that indeed inflation can be calculated and accurately predicted. It is also worth noting that there are various ways and formulas that are used to calculate this phenomena. Some of these are documented below. Calculating the inflation rate CPIthis year – CPIlast year I = CPIlast year Calculating The Consumer Price Index (CPI) for the current year CPIthis year = (I x CPIlast year) + CPIlast year Calculating The Consumer Price Index (CPI) for the previous year CPIlast year = CPIthis year (I +1) This formula for calculating interest rate is mostly used by economists. On the other side it can also be used by corporations to compare the revenue they are earning over a given time frame and also for the purpose of calculating the expenses incurred over the same period. ...
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