Question

This is a problem that runs across many disciplines; we have to adjust GDP for inflation, for example, which we do using the GDP deflator, and we discuss nominal and real wages when talking about changes to minimum wage. How might inflation help a company that has a lot of fixed assets? Would inflation affect a service company?

Answer 1

SOLUTION

COMPANY BEING BENIFITED ON INFLATION ON FIXED ASSESTS

Inflation is defined as a sustained increase in the general level of prices for goods and services. It is measured as an annual percentage increase as reported in the consumer price index generally prepared on a monthly basis by the U.S bureau of labor statistics. As inflation rises purchasing power decreases. Basically the values of the fixed assets are affected but the company will adjust the pricing of goods and services so that it will be retained, the financial markets react and there is an impact on the imposition of investment portfolios.

Inflation on the one degree or another is a fact of life. Consumers, businesses and investors are impacted by any upward trend in prices , but in turn the companies will see to it and adjust the prices of goods and services.

It is generally assumed that stocks, because the companies can rise the prices of goods and services are a better hedge against inflation than fixed income assets.

INFLATION ON SERVICE COMPANY

Rising prices known as inflation, impact the cost of living, the cost of doing business, borrowing money, mortgages cooperate and government body yields and every other facet of the economy it can be both beneficial to economic recovery in terms of service company and in some cases negative.