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Inflation, which affects the purchasing power of money over time, is also not taken into account by nominal interest rates. In economics, the nominal interest rate is the rate unadjusted by the ...
A CPI is a statistical estimate constructed using the prices of a sample of representative items whose prices are collected periodically. Sub-indices and sub-sub-indices can be computed for different categories and sub-categories of goods and services, which are combined to produce the overall index with weights reflecting their shares in the total of the consumer expenditures covered by the ...
But by and large, the effects of high inflation are negative. Rising consumer costs make it harder for average Americans to simply get by, and it reduces discretionary spending on things like ...
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The equation is an approximation; however, the difference with the correct value is small as long as the interest rate and the inflation rate is low. The discrepancy becomes large if either the nominal interest rate or the inflation rate is high. The accurate equation can be expressed using periodic compounding as:
Since the inflation rate over the course of a loan is not known initially, volatility in inflation represents a risk to both the lender and the borrower. In the case of contracts stated in terms of the nominal interest rate, the real interest rate is known only at the end of the period of the loan, based on the realized inflation rate; this is ...
Shadowstats.com is a website that analyzes and offers alternatives to government economic statistics for the United States.Shadowstats primarily focuses on inflation, but also keeps track of the money supply, unemployment and GDP by utilizing methodologies abandoned by previous administrations from the Clinton era to the Great Depression.
Monetary inflation is effectively a flat tax on creditors that also redistributes proportionally to private debtors. Distributional effects of monetary inflation are complex and vary based on the situation, with some models finding regressive effects [15] but other empirical studies progressive effects. [16]