MAFundamentals defines the foundation of Management Accounting from cost concept, classification and analysis. It provides general discussion on COST, VOLUME, PROFIT, VARIANCE and other information necessary for performance measurement, decision making and pricing.
Showing posts with label GDP. Show all posts
Showing posts with label GDP. Show all posts

Price Level Changes and Inflation

The two effects of changing price levels are:
  1. Inflation - an increase in the general price level
  2. Deflation - a decrease in the general price level
The general price level is inversely related to the purchasing power of money.

The Price Indices used in the calculation of price level changes are:
  1. Consumer Price Index (CPI) - measures the price level by a monthly pricing of a specific set of goods/services purchased by a typical urban consumer.
  2. Gross Domestic Product Price Index (GDP Deflator) - includes the prices of all goods and services produced in the country. It includes investment, government purchases, exports, as well as consumer goods and services.
  3. Producer Price Index - measures the prices of specified commodities at the time of their first commercial sale.
The impact of Inflation on Financial Management are:
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