Investing and Financial Markets

How does inflation affect investment?

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Answered 2009-01-26 14:46:27

how inflation affects investment

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How does inflation affects investment?

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%.

How will weather affect the inflation of giant balloons?

how will the weather affect the inflation of the ballooons

How will inflation affect hospitality industry in Nigeria?

how does inflation affect hospitality in nigeria industry

What does Incorrect tire inflation affect?

Effect of inflation at unemployed people

How do you use inflation in a sentence?

Inflation of prices can negatively affect an economy.

How is ROI or return on investment calculated?

Return on investment is calculated by subtracting investment capital from the return, taking into account inflation, taxation and the time frame involved.

What is the effect of inflation on the discount rate?

Discount rate = inflation expectation + risk premium for the investment, so when inflation goes up, your discount rate should go up

Which investment has the least risk?

Treasury backed securities, but there is still inflation risk with these.

How do interest rates and inflation affect real estate in south Africa?

explain how do intrest rates and inflation affect the real estate

What do you think happens to the value of investments that grow slower than inflation?

If an investment grows slower than inflation, its real value decreases.

What factors affect the rate of return of an investment at maturity?

What factors affect the rate of return of an investment at maturity?

Was the ATM the answer to inflation?

No. The ATM does not in any way affect or answer inflation. It is just a machine through with customers can do banking transactions without visiting their bank. It does not cause or affect inflation. Only the country's central bank can control inflation by changing regulatory policies.

Is it good to have a high inflation rate or low?

Low inflation is considered good because it represents price stability, which encourages productive planning and investment.

What is the Impact of inflation in return on investment?

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 value 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.

What are the new issues in international trade and investment?

These are the main new issues in international trade and investment:Lack of trustSecurity problemsIncrease in inflation

How did inflation affect the roman empire?

inflation happens when money loses its value and it affected the roman empire.

How do chemicals affect the inflation of a balloon?

Inflation of a balloon is NOT a chemical reaction, so there are no chemicals involved in 'affecting' it.

What does the acronym tips stand for?

TIPS stands for Treasury Inflation Protected Securities. It is an investment under government financing, which help investors fight the negative values caused by inflation.

How does interest rates affect inflation?

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.

Does inflation affect exchange rates?

Different countries have different rates of inflation, which are an important factor in determining exchange rates.

How would low interest rates affect airlines?

Low interest rates positively affect airline industries because they lead to the investment of new technology and capital. This will increase the rate of return and increase the value of the infrastructure and services at lower costs, which will induce better quality and higher demand, which will financially benefit the airline industries with lower rates of inflation. High interest rates will actually increase inflation.

How does inflation affect savings?

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.

How does inflation affect the domestic economy regarding purchasing power?

As the inflation increases, the purchasing power of the money with the people in an economy decreases.

How do you overcome inflation by government?

in the inflation situation government should careful about the expenditure. Government should exercise monetary policy . it will help to implement investment. imran ali, student ,p.u ,bangladesh

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