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Inflation

info about inflation

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charmaine fos
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18 views4 pages

Inflation

info about inflation

Uploaded by

charmaine fos
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Inflation

Inflation is the increase in the prices for goods and services from one year to
another, thus decreasing the purchasing power of money.
FC = PC (1+ f)n
Where: PC = present cost of a commodity
FC = future cost of the same commodity
f = annual inflation
n = number of years
Example 3.21: An item presently costs P1000. If Inflation is at the
rate of 8% per year. What will be the cost of the item in two years?
Solution
FC = PC ( 1+ f)n = P1000 (1 + 0.08)2 = P116.40
In an inflationary economy, the buying power of money decrease as
cost increase. Thus,

where F is the future worth, measured in today’s pesos, of a present


amount P.
Example 3.22: An economy is experiencing inflation at an annual rate of 8%. If
this continuous, what will P1000 be worth two years from now, in terms of today’s
peso?
Solution:

If interest is being compounded at the same time that inflation is occurring. The
future worth will be

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