Inflation and the MARR - Engineering Economics Lightboard

Engineering Economics, Inflation and the MARR; real MARR; actual MARR; current MARR; minimum attractive rate of return; minimum acceptable rate of return; real rate of return; correcting rate of return for inflation

[@osamaa5124]

You are doing a great job explaining the concept, even better than the textbook we use. Well done

[@EngineeringEconomicsGuy]

Glad you think so! Thank you!

[@taahirhartogh857]

I am a Mech Eng student based in South Africa and this video has really helped me understand this topic. Thank you!

[@EngineeringEconomicsGuy]

Great to hear!

[@yehyamahmoud587]

روح يا شيخ ربنا يفتحها فى وشك ويجعلك وزير مالية كندا

[@EngineeringEconomicsGuy]

Thank you for the great comment!

[@she8334]

Your content is amazing and so helpful. keep going🤍

[@EngineeringEconomicsGuy]

Thank you!

[@ahmedezz5025]

this was way too Good sir, it was very explanatory.

[@EngineeringEconomicsGuy]

Thanks a lot!

[@gabewinter9406]

If our 100 grows to 150, but what we thought we could buy with 100 ends up costing 150 or worse, we we need our money to grow faster than the inflation

[@EngineeringEconomicsGuy]

Exactly right!

[@saint.caulyns]

would it be the same calculating the real interest rate (using the inflation rate and the bank's interest,) and if i' isn't as high as the realMARR then he should decline the investment and if i' > realMARR, he should accept the investment?

[@EngineeringEconomicsGuy]

Yes, you've got it!

[@saint.caulyns]

@@EngineeringEconomicsGuy thank you

[@gabewinter9406]

is i' the rate of change?

[@EngineeringEconomicsGuy]

No, the little single quote after the i is not indicating a derivative like it does in math. It is just meant to distinguish between the current (or actual) interest rate, and the "real" interest rate, which has been corrected for inflation. The words and the symbols used for inflation can be confusing. Have a look at some of my other inflation videos to get a better understanding. Hope this helps!

[@EngineeringEconomicsGuy]

i' is the "real" interest rate.

[@egemencorbac158]

how can he write in reverse

[@EngineeringEconomicsGuy]

The video is flipped using software.

[@gabewinter9406]

some engineering professor at OSU gave away the secret because his OSU shirt was text backwards and not many people are lefthanded anyway. @@EngineeringEconomicsGuy