Chapter 5 Inflation and Index Numbers

Question 1

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

Answer 1

Inflation

Question 2

The effects of inflations applied to a dollar mount

Answer 2

escalation

Question 3

effects of inflation are removed from a dollar amount

Answer 3

de-escalation

Question 4

a technique for converting forecasted amounts to economically comparable amounts at a common point in time, considering the time value of money.

Answer 4

Discounting

Question 5

are defined as money or prices expressed in terms of values actually observed in the economy at any given time.

Answer 5

Current Year (CY) dollars

Question 6

a number representing the change in prices relative to a Base Year of 1.0000

Answer 6

raw inflation index

Question 7

a weighted average of the inflation indices for the applicable sub-appropriations.

Answer 7

composite inflation index

Question 8

a provision of funds; a type of budget authority

Answer 8

Appropriations

Question 9

an administrative reservation of funds authorizing the creation of an obligation.

Answer 9

commitment

Question 10

a responsibility to pay for future goods or services to be received

Answer 10

obligation

Question 11

is a charge against available funds or the actual payment of funds.

Answer 11

expenditure

Question 12

the rate at which dollars in each appropriation are expected to be expended based on historical experience

Answer 12

Outlay profiles

Question 13

refer to dollars reflected against a specific year that have been adjusted for the effects of inflation.

Answer 13

Constant Year “CY” / Base Year “BY”

Question 14

Dollars refer to dollars that have been adjusted to account for outlay profiles and cover escalation of expenditures over a multi-year period.

Answer 14

Then Year “TY”

Question 15

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

Answer 15

Raw Indices

Question 16

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

Answer 16

weighted indices

Question 17

depicts the rate of change over a period of time for the price of a class of a good or service

Answer 17

Price Indexes

Question 18

There are two types of indices _____ & _____. What are each used for?

Answer 18

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.)

Question 19

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

Answer 19

Multiply, Divide