Lecture 14 Inflation - CE 395 Engineering Economics UAB...

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CE 395 Engineering Economics UAB Summer 2005 W. Hitchcock 1. Impact of Inflation 2. Probabilistic Risk Analysis - Part 1
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Inflation Caution: When performing engineering economic analyses with data spanning multiple years, be sure that consideration of inflation is handled in a consistent manner.
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What is Inflation/Deflation At a specific point and time, goods and services have a certain market price or value expressed in monetary units. At some future point in time, the same monetary market price for the same goods and services will be different. If the price is higher, we say that inflation has occurred. If the price is lower we say that deflation has occurred.
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Impact of Inflation on Economic Analyses What deflation could possible occur, we will limit our study to inflation. Our objective is to gain an appreciation for what inflation is and a basic understanding of how to properly incorporate inflation into an economic analysis. At this point you are familiar with cash flows and time value of money considerations in economic analyses. As you employ engineering economics concepts in practice, you must insure that you are confident that your analysis properly considers the potential impact of inflation on the outcome.
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Lecture 14 Inflation - CE 395 Engineering Economics UAB...

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