How does inflation affect investment?
how inflation affects investment
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Inflation affects the airline industry in a negative ways Theincrease in the prices does not help the business as the purchasingvalue of money is usually decreased which causes huge losses to theindustry.
It affects your business because your products prices increase and so do the wages of any employees you have. If the inflation rates are 4% then that means in one year Â£100 will drop in value by 4%, so it will only be worth Â£96. Effectively, the business must then raise wages to cover this exp…ense. (MORE)
We are heading into a period of high inflation due to the impact of oil costs. What are stocks that will survive this - other than the obvoius - Oil stocks! fgfgfgf
People will not want to Spend money. They will buy items which they need rather than get items or products which are not important. They will focus on getting products they need rather than buy items they dont need because prices are increasing they dont have money to spend on other things.
It decreases the purchasing power of people. It means that it will take you more money to buy the same amount of goods.
During periods of high inflation, investors generally try to preserve purchasing power by seeking returns that keep up with inflation.. Equity (stock) markets generally perform poorly in periods of high inflation with the exception of stocks of companies that benefit from inflation (like commodity …companies). The Dow Jones Industrials average was basically flat in the 1970's when inflation was high.. Yields on fixed income securities (govt bonds and corporate bonds) usually rise with the corresponding increase in inflation since fixed income investors need a premium over the rate of inflation for a 'real' rate of return. For example, a bond investor that requires a 5% return in a 3% inflation environment will require 7% in a 5% inflation environment.. The Investopedia link below has a basic article on this topic. (MORE)
Both are good inflation hedges, but I would recommend a basket of commodities to diversify your bet. Try the ETF, PowerShares DB Commodity Idx Trking Fund .
This is not the "official" politically correct answer but it is the true answer. In spite of what you may hear. The main thing that causes inflation is "how much money the feds print". The wealth of a nation is made up of two things, one; the workforce, which represents the kinetic (active) energ…y in society and two; all the goods, products, cars, houses, books, planes, trains and tubes of toothpaste that everyone has. This represents the (stored energy) in society. It is everything that humans put a value on. These two factors change slowly as; one, the population increases and two, more products are created faster then the old ones degrade and become valueless. So, since the amount of kinetic and stored energy in society stays about the same why is there so much variation in inflation? In fact the two factors I mention above should actually cause reverse inflation but we always have positive inflation, why? I can explain it like this -- you have X energy in society and Xdollars to represent the X amount of energy, then if you go and print more money! Now, you have more dollars then before but about the same amount of goods and workforce! You have Xdollars + (new dollars printed) to represent the energy in society. This means the dollar is now worth maybe 98 percent of what it was worth before the last printing of money depending on how much they print or how soon they print it. If they printed the same amount of money as they take out of circulation (old bills being burned because they are torn or whatever), we should have about 0% inflation. Inflation is created and controlled by the Federal Reserve which are run by private banks owned primarily by the Rothschilds and their cohorts, I mean partners. Inflation, I can assure you is done for the benefit the bankers and wealthy, not us but that's another story. And yes, the US dollar is being devalued on purpose, I presume this is done primarily because they want to bring in the new Amero currency but there are probably other reasons as well. (MORE)
Money from the black economy is sometimes invested in legal ventures to make a lifestyle look like it's the product of legal work. This means that sometimes there's a lot of money flowing through the system and this results in an increase in the price of some goods.. In Moscow, for example, due to …corruption and the existence of many billionaires, prices are high which means some Moscovites have trouble buying necessary goods such as food and clothing. (MORE)
\n \n 12.00 \n \n \n\n Effects of\ninflation on Farmers: The price of farm products goes up faster than\ncosts. Costs lag behind prices of product received by the farmers. \nIt has been observed in India that inflationary tendencies during war and\npost-war periods have helped farmers in payi…ng off their old debts. \nMoreover, farmers are generally debtors and have to pay less in real terms,\nwhile the land revenue, taxes, etc., do not rise much. Thus farmers\ngenerally gain during the periods of inflation. \n\n \n \n Normal \n 0 \n \n \n \n \n false \n false \n false \n \n EN-US \n X-NONE \n X-NONE \n \n \n \n \n \n \n \n \n \n \n \n \n \n MicrosoftInternetExplorer4 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n (MORE)
Inflation is the overall increase in cost of products and services. Increase in taxes and fees leads to inflation. Inflation also generally causes due to scarcity. When the cost of business increases, the prices of the products increases and this abrupt increase, the income rate supposedly goes down…. These things forces the employees to search better paying jobs or work relentlessly hoping their employer will give them a raise. Similar is the case, when the personal income tax, property tax, sales tax, auto registration fees increase then either the employee has to live on less or ask the boss for a hike. . The ever increasing inflation has forced the common man to borrow money from banks and other financial institutions. The consequences, of course people have to stand with indefinite debts or either have to cut down on their lifestyle or beg for hike in compliance with inflation to assist them move at the forefront. . Although common man is fighting this never-stopping price rise on Delhi's streets, whereas our politicians are finding ways to cope with the same issues in AC and other luxuries. Government is busy solving internal conflicts by supporting other party. And the question that arises here is who is thinking about the problems faced by common man. . Finance ministry hopes that inflation will come down till years end, but the issue that rises here is, Is government taking the "inflation" issue only on the political lines???? Inflation in America has been consistent apart from the year 1970, when an unexpected percentage rise was encountered. However, the American govt. managed to deal with the issue at once. The middle class requires a lot of financial planning as well as retirement planning that usually everyone forgets. Under all these circumstances, the survival of common man is becoming tougher and tougher. With so much to lose, nobody is expected to gain, and a much serious thought is expected by the govt. to meet the current obligations. . (MORE)
It reduces the purchasing power of money. For example, a movie ticket that cost 25 cents 50 years ago mightcost $9 today. That quarter no longer has the same purchasing powerthat it had 50 years ago.
Overspending brings more money into people's pocket and thus raises aggregate demand in the economy, especially in the short run where production units can not easily adjusted to increase their production! This creates excess demand or demand pull type of inflation underwhich too much money is chasi…ng too few goods and services. In another scenario, government overspending leaves many government workers with little to no accountability. Low accountability eventually leads to a lack of motivation and production. With low production and too much money in people's pockets, we expect excess demand and demand pull inflation too!! By Balozi Morwa (Tanzania Investment Bank, 2013) (MORE)
If the returns on your investment is less than the inflation rate then effectively the value of your money is going down. Lets say you invest Rs. 10000/- which returns you 6% per annum which means at the end of the year it would be worth 10600/ Assuming the national inflation rate is 8% then w…hatever was worth 10000 rupees last year is worth 10800 this year which means your money has effectively gone down in value by Rs. 200 (MORE)
In a nutshell, the key determinants that affect investment are: . The Keynesian Marginal Efficiency of Capital Theory, I=f(r) . The Keynesian explanation if there is non ceteris paribus, I=f(all other factors) . The Accelerator Theory . The role of firms' profits . And then a collection of th…e other factors, being exchange rates et cetera. (MORE)
Basically, GDP=AE=Y where AE is aggregate expenditure and Y is income.. Y=C+I+G+(X-M). C is consumption, I is investment, G is government spending, X is exports and M is imports.. So increased investment can lead to increased GDP.. In a bit more detail:. I can be broken down into: Investment=I0… - bi where I0 is 'autonomous' investment (as in firms will do it nor matter what). i is the interest rate and b is the marginal propensity to invest. So, as interest rates increase, the cost of investing increases and so investment decreases. (MORE)
The inflation affects the investment indirectly when read with the return. Example if an investment provides a return of 6%, and the inflation during the same period is 5%, the investment in real terms increases only by 1% and not by 6%, as inflation eats away returns to the tune of 5%.
Inflation is the primary and negative factor of all economictroubles including GDP, because it lowers consumerism, promote unemployment, and reduceimport and export. . -- Not quite. Inflation itself isn't necessarily a bad thing, andin fact deflation (negative price growth) can adversely affect th…eeconomy is well. High inflation can certainly hurt spending andemployment, but inflation is just a term used for the growth rateof prices, which happens naturally as economies expand. The USFederal Reserve targets an inflation rate of 2-3% as a goal.Inflation has historically been a major concern in some of thedeveloping world especially, and source of economic (and political)instability. (Source: Economics PhD student who just finishedgrading a paper that cited the above answer). (MORE)
Calculating the return on investment you actually want to know whether the investment will give you positive value in the end. You wouldn't want to waste your money, right? Thus you want to make sure that the net present value of your investment is positive. However, inflation deteriorates the val…ue of money. 100 money today most likely can buy you more today than in a year's time. That's why you are interested in adjusting the expected future cashflows to the expected inflation rate. Overall, not accounting for inflation will overestimate the value of investment. In other words, you could choose something which will not bring you benefit. (MORE)
Well the same way as it affects anyone else. If the business don't raise the prizes on whatever product they sell alongside the inflation it will end up paying higher and higher prizes on materials and services from other companies. Meaning lower and lower revenue.
If the employer is unwilling or unable to inflation proof the salaries of his employees, they will obviously become disillusioned and disgruntled. Some may seek greener pastures and if those that leave include key individuals, the profitablity of the company may be adversely affected.
Inflation destroys it. The money made is lowered in value. Printing money causes this issue. If we print enough money the profit completely goes away and this your financial well being and development does also.
Because people who are unemployed have no constant source of income, and the higher the costs of things they buy go up, and the less money they receive, the worse-off they are. Question irrelevant, since there is currently zero inflation. Food and housing and general living cost are NOT rising. Th…e unemployed have problems, but inflation is not one. (MORE)
Inflation: Especially luxurious emperors like Commodus depleted the imperial coffers. By the time of his assassination, the Empire had almost no money left. Money could be acquired by taxation or by finding new sources of wealth, like land, but the Empire had reached its furthest limits by the t…ime of Trajan. Nero and other emperors debased the currency in order to supply a demand for more coins. By debasing the currency is meant that instead of a coin having its own intrinsic value, it became representative of the silver or gold it had once contained. By the time of Claudius II Gothicus (268-270 A.D.) the amount of silver in a supposedly silver denarius was only .02%. This led to or was severe inflation, depending on how you define inflation. Land: Rome's wealth was originally in land, but this gave way to wealth through taxation. The Cato Institute says that emperors deliberately overtaxed the senatorial (or ruling) class in order to render it powerless. To do this, the emperors needed a powerful set of enforcers -- the imperial guard. Once the wealthy and powerful were no longer either rich or powerful, the poor had to pay the bills of the state. These bills included the payment of the imperial guard and the military troops at the empire's borders. "Feudalism": Since the military and the imperial guard were absolutely essential, taxpayers had to be compelled to produce their pay. Workers had to be tied to their land. To escape the burden of tax, some small landowners sold themselves into slavery, since slaves didn't have to pay tax and freedom from taxes was more desirable than personal liberty. Since the Empire wasn't making money from the slaves, the Emperor Valens (368) declared it illegal to sell oneself into slavery. The small landowner had become a feudal serf. (MORE)
There are many things that affect the results of your investmentexercise. Demand is one thing that affects the results of aninvestment exercise.
for a lay-men to understand "inflation" means increase in the price of the commodity and when the income is fixed therefore an individual spends more from his pocket for the same amount of commodity. So inflation affects the saving.... During inflation bank increases rate of interest to attract …funds for investment but the individual or who is saving saves less therefore no increase in the absolute amount. but this decrease the effect of inflation but does not put an end to inflation. For example:- an individual used to save 1 Rs for 1% interest but after inflation he is able to save only 0.50 Rs and bank increases the interest to 2% then also he output is the same.. therefore to decrease the effect of the inflation the bank increases the interest because more saving is directly proportional to increase in investment from a nations point of view. and the investment is done if the rate of return is positive. National income = expenditure + saving and saving = investment because only those funds can be invested which is available. inflation effect when the nation is more dependent on the rest of the world. but if the nation is self sufficient then no need to fear as india and china was affected less in 2008 but after that india china helped the effected nation to come-up at the time of difficulty and as it may be see that now india and china is also facing a tough time and if the scenario is repeat than india and china can also be affected to a larger extend. disinflation and deflation this two terms are not same as deflation is opposite of inflation and disinflation is when the effect of inflation is in the process to go down. inflation_______disinflation________deflation. (MORE)
Construction industry is similar to the manufacturing industry perhaps engg. made a product on the site rather than in a factory. while building something you required material & labor. when the inflation occur the price of the items & services increase, day to day essential things like food, fuel, …consumer goods are become costly, thus this also effect individual & company. therefore the material price or manufactured things are become costly as the raw material prices goes up and similarly services are also become costlier. Thus the material of cement, steel etc increase so would be the total cost of construction will increases. (MORE)
When interest rates are high, investors will consider investing inshort term investments, instead of long term investments. Wheninterest rates are low, investors will consider investing in bondsbecause they are safer.
As prices of raw materials goes up, prices would go up, causing thecurrency to buy less.
If Inflation takes place, our exports become expensive, while our imports become cheaper. Therefore, the price in our local economy is rising so is the value of currency, therefore appreciating exchange rates.
This affects it because inflation rises and them things become more expensive, also then more money is produced which means it starts becoming devalued. Due to this the BOP (Balance of Payment) reduces so the currency is not devalued and more.
ahh inflation is the boom killa ting ya kno fam. jus run when u see it innit
if an interest rate is high, it is likely that inflation is also high. Generally, one doesn't affect the other so much as measure the other.
Generally human tendency is always thinking about future as the future is uncertain. In economics when income increases consumption also increases but less than proportionately. This is because everyone wants to save some portion of their income for their future. The reason for India for not so affe…cted when Global recession was so much impact on the western countries, is saving tendency of the Indians. However, if the saving is high in the economy due to uncertainity, the volume of circulation of the money in the economy will become less and it will lead to lesser borrowing and investing attitude of the people. However, for any healthy economy there must be dynamic borrowing and investing with considerable amount of saving. (MORE)
Inflation affects low income earners more than high income earners. This is because low income earners' income tends not to rise as quickly as prices, therefore, their purchasing power decreases. Also, low income earners do not have the skills to demand higher wages. It should be noted that high inf…lation generally leads to interest rate increases. This affects low income earners' cost of living and compounds the other affects of inflation. So, inflation decreases purchasing power of low income earners relative to high income earners, whose income increase as quick as inflation. Ultimately, income distribution becomes less equal. (MORE)
Inflation affects the 3 functions of money by reducing its actualvalue. This requires prices to increase while wages are notadjusted.
Inflation is that increasing prices of goods and services, but the salaries of retired people do not rise as the prices. They have fixed incomes, and therefore their money buys a little less each month.
Different countries have different rates of inflation, which are an important factor in determining exchange rates.
Inflation of a balloon is NOT a chemical reaction, so there are no chemicals involved in 'affecting' it.
Inflation is the devaluing of currency by physically printing more without having equivalent assets added to your possession. It would make imports cost more and exports be worth less. This is what happens when a trillion dollars is printed and poured into the pockets of those responsible for an …economic crash in the first place. By printing a trillion without adding assets, it makes all the dollars worth considerably less. Everything around you goes up in price while you are making the same amount as before the printing splurge. This action makes every citizen of the USA poorer. (MORE)
Inflation is the a period of time during which there is a continuous rise in the general price level of various commodities consumed by the majority of the population. Inflation affects everyone: THE INDIVIDUAL CONSUMER: if they earn a fixed amount of income, they are worse off as they will be… experiencing a loss in their purchasing power. THOSE WHO HAVE BORROWED MONEY: they will gain as they will repay back a sum of money which is worth less in real terms. LENDERS: they will lose because they will receive back a sum of money which is worthless in real terms (MORE)
More goods will be provided only at higher prices. Thus, as the multiplier chain progresses, pulling income and employment up, prices will rise, too. This development, as we know from earlier chapters, will reduce net exports and dampen consumer spending because rising prices erode the purchasing …power of consumers' wealth. As a consequence, the multiplier chain will not proceed as far as it would have in the absence of inflation. . (MORE)
Prices get generally higher for a reason. Firms / companies need money. In order to get that, they may cut their costs. The logic is that they will have less capital to invest in. Result: either quality is affected, or employment is. In that case, it will be a negative development because the firm …/ company likes to produce more efficiently. As a result the workforce productivity increases, meaning the employment decreases. However inflation can positively influence employment as well. A company may risk its budget in employing good quality workforce to get back on track, on the market and compete. Please note that how inflation specific influences employment also depends on the type of market; are we talking about perfect competition, monopolistic market ... ? Besides these technical aspects, there is also a psychology behind this all. The rising prices over time could lead to employment rates increasing. The reason for this depends on how the inflation affects the management of the companies. (MORE)
They come out of school and can get a good paying job due to highmoney circulation and low prices
It has rendered our youth to be unable to learn the proper use of the English language. *Troll face*
When everything skyrocketed, people beagn to lose money but they also thought of ideas to start reducing, reusing and recycling items.
Absolutely everybody is affected by inflation. Poor and rich people are affected by inflation although in different degrees.
The higher the inflation, the lower the profit and vice versa, it's applicable for every stock market around the world
The Confederate dollar was not based on gold or any other real assets. It was simply based on a promise to redeem the banknotes in the event of Southern victory, and consequent independence. When it was clear that the South was bound to lose, after the double Union victories of July 1863, the curre…ncy went steadily downhill. After Lincoln won the 1864 election, it became worthless. (MORE)
Inflation is endemic in a capitalistic society. Different economies(currencies) are affected differently and over time there is nosuch thing as a safe currency.