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Multi Rate
how does inflation rate affect a multi national coorperation?

HELP ANYONE??? icon sad
pleaseee
cheers

In a simple closed economy, a constant inflation rate is easy to deal with. In general, you can assume that all nominal costs will go up at the same rate, leaving relative costs constant.

However, different economies have different inflation, even if they are using the same currency (consider Greece vs. Germany) so for a multi-national corporation, the handling of inflation rates is very complex:

- it will affect future exchange rates between currencies in an unpredictable manner

- it may well change comparative advantages over time as the real costs of different resources in different locations will change relative to each other.

- it well certainly change the formulas for deciding internal prices, both for simple economic reasons and because of the tax implications (tax brackets tend to remain costant even as inflation changes their value)

Whats On My YouTube Today?

Lec-33 Multi rate Signal Processing

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