Chapter 5 Inflation and Index Numbers Flashcards
An increase in the volume of money and credit relative to available goods and services resulting in a continuing rise in the general price level
Inflation
The effects of inflations applied to a dollar mount
escalation
effects of inflation are removed from a dollar amount
de-escalation
a technique for converting forecasted amounts to economically comparable amounts at a common point in time, considering the time value of money.
Discounting
are defined as money or prices expressed in terms of values actually observed in the economy at any given time.
Current Year (CY) dollars
a number representing the change in prices relative to a Base Year of 1.0000
raw inflation index
a weighted average of the inflation indices for the applicable sub-appropriations.
composite inflation index
a provision of funds; a type of budget authority
Appropriations
an administrative reservation of funds authorizing the creation of an obligation.
commitment
a responsibility to pay for future goods or services to be received
obligation
is a charge against available funds or the actual payment of funds.
expenditure
the rate at which dollars in each appropriation are expected to be expended based on historical experience
Outlay profiles
refer to dollars reflected against a specific year that have been adjusted for the effects of inflation.
Constant Year “CY” / Base Year “BY”
Dollars refer to dollars that have been adjusted to account for outlay profiles and cover escalation of expenditures over a multi-year period.
Then Year “TY”
Reflects the change in value from one year to the next. It is used to normalize for the effects of price changes - used to normalize expenditures at a specific point in time
Raw Indices
Created specifically to account for the additional cost of price change expected to be incurred from expenditures beyond the year of obligation. used to normalize obligations which will be spent over a period of years
weighted indices
depicts the rate of change over a period of time for the price of a class of a good or service
Price Indexes
There are two types of indices _____ & _____. What are each used for?
Raw Indices are used for Constant Year to Constant Year conversions. Weighted indices are used for Constant Year to Then Year conversions and vice-versa. A combination of indices are used for Then Year to Then Year dollars. (Weighted indices then raw indices, and then weighted indices again.)
If going from the table’s year to any other year ________ by the index. If going from any other year to the table’s year ______ by the index
Multiply, Divide
