Economics

Inflation reduces the cost of equity financing by a factor of c/. ( 1 – c). This term refers to the “inflation tax” paid by shareholders who get only nominal gains; real capital gains taxation would erase this effect. What would be the impact of inflation on a company’s cost of capital? It can only […]

The United States’ annual inflation rate has risen from 3.2 percent in 2011 to 4.7 percent in 2021. This suggests that the dollar’s purchasing power has deteriorated in recent years. What will be the rate of inflation in 2020? In 2020, the inflation rate was 1.23 percent. Inflation is presently 7.87 percent higher than it

Let’s look at a basic example of a commodity that had a CPI of 150 last year and has now risen to 158 this year. Calculate the current year’s rate of inflation for the commodity using the given data. How do you account for future value inflation? PV = FV (1+i)-n, where PV denotes current

Interest rates are its primary weapon in the fight against inflation. According to Yiming Ma, an assistant finance professor at Columbia University Business School, the Fed does this by determining the short-term borrowing rate for commercial banks, which subsequently pass those rates on to consumers and companies. This increased rate affects the interest you pay

Governments can fight inflation by imposing wage and price limits, but this can lead to a recession and job losses. Governments can also use a contractionary monetary policy to combat inflation by limiting the money supply in an economy by raising interest rates and lowering bond prices. Another measure used by governments to limit inflation

With inflation, real estate works wonderfully. This is due to the fact that as inflation rises, property prices rise as well, lowering the amount a landlord may demand for rent. As a result, the landlord will be able to collect a bigger rental revenue over time. This allows you to keep up with the rising

Divide the cost of the market basket in year t by the cost of the identical market basket in the base year to determine the CPI in any year. How is inflation calculated using the CPI? The Consumer Price Index (CPI) is a measure of the average change in prices paid for a basket of

TIPS (Treasury inflation-protected securities) are government-issued bonds that are inflation-indexed. As a result, when inflation rises, TIPS can provide higher returns than non-inflation-linked bonds. TIPS modify their price to maintain their real value as inflation rises. This makes them popular among investors, especially when the economy is struggling or the threat of inflation looms large.