Chap 11-1

Chap 11-1 - Inflation Economic Analysis Chapter 11 1...

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1 Inflation Economic Analysis Chapter 11
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2 Inflation A loss in the purchasing power of money over time or the same dollar amount buys less of an item over time Deflation prices decrease over time and a specified dollar amount gains in purchasing power Avg starting salary in 1967: $7,500 Avg starting salary in 1995: $36,500 General Inflation: 5.56% Equiv. Annual raise: 5.81%
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3 Consumer Price Index based on a typical market basket of goods and services required by average consumer compares the current cost with that 1 month ago, 1 year ago, 10 years ago Base Period used by the Dept of Commerce is 1967 and the index value is set at $100 If the market basket of same goods and services costs now $455.80, which means the CPI for 1995 relative to the base period price is 455.8%
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4 CPI measures general price increase Engineering Economic analysis requires appropriate price indices to estimate the price increases in raw materials, finished products, and operating costs
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This note was uploaded on 03/11/2010 for the course CEVE 322 taught by Professor Segner during the Spring '10 term at Rice.

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Chap 11-1 - Inflation Economic Analysis Chapter 11 1...

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