In economics, inflation is a rise in the general level of prices of goods within an
economy over a period of time. That means the real value of money will decline
and generate a loss of purchasing power. “A dollar today doesn’t buy as much as
it did twenty years ago.” In 1931, for example, it was possible to go to the cinema
for 25 cents. Today we have to pay between five and nine Euros. In Germany the
fear of inflation is based on some experiences the Germans already have made
with it.
Table of Contents
- Executive Summary
- Table of Contents
- List of Abbreviations
- List of Figures
- 1 Introduction
- 2 Problem Definition
- 3 Objectives
- 4 Methodology
- 5 Main Part Inflation Measurement
- 5.1 The basket of goods
- 5.2 The calculation of price indices
- 5.2.1 Calculation of the price of the basket
- 5.2.2 Some information about Laspeyres and Paasche indices
- 5.2.3 Calculation of the inflation rate
- 5.3 Overview about different problems of inflation measurement
- 5.4 Why is information on inflation important to businesses?
- 5.4.1 Consumer behaviour and its consequences for businesses
- 5.4.2 Slightly positive inflation rate
- 5.4.3 Inflation rate above 4%
- 5.4.4 Deflation
- 5.4.5 Costs of inflation
- 6 Results
- 7 Conclusion
- Appendices
- ITM Checklist
Objectives and Key Themes
This assignment provides an in-depth analysis of inflation measurement and its implications. The authors aim to explain the concept of inflation, its measurement methods, and its relevance to businesses. Key themes explored in the text include: * **The Basket of Goods and Services:** Understanding the composition and weighting of the basket of goods and services used for inflation calculation. * **Price Index Calculation:** Analyzing the Laspeyres and Paasche price index methods and their application in measuring inflation. * **Inflation Rate Calculation:** Exploring the process of calculating the inflation rate based on the Consumer Price Index (CPI). * **Challenges of Inflation Measurement:** Identifying factors such as price, product, and consumer behavior that can influence or impede accurate inflation measurement. * **Inflation’s Impact on Businesses:** Examining how different inflation rates can affect business decisions and strategies.Chapter Summaries
The text begins with an introduction and a definition of the problem of inflation measurement. Chapter 3 outlines the objectives of the assignment, followed by a description of the chosen methodology in Chapter 4. Chapter 5 focuses on the main part: inflation measurement. It dives into the composition of the basket of goods, different price index calculation methods, and the calculation of the inflation rate. The chapter also discusses challenges in accurately measuring inflation, such as price, product, and consumer factors. Chapter 5 concludes by exploring the importance of inflation information for businesses, examining different inflation scenarios, and the costs associated with inflation.Keywords
This paper focuses on inflation measurement, utilizing key concepts such as the basket of goods, price indices (Laspeyres and Paasche), Consumer Price Index (CPI), inflation rate, and the impacts of inflation on businesses. The analysis also incorporates discussions about price, product, and consumer behavior, as well as the implications of different inflation scenarios and the costs associated with inflation.
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- J. Wimmers (Author), C. Optiz (Author), C. Mayer (Author), 2009, Inflation measurement, Munich, GRIN Verlag, https://www.grin.com/document/136631
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