Question : Excel Model Using Real & Nominal Inflation Rates

I have been asked to produce a model that shows both the 'real' and 'nominal'' rates of inflation.  I have looked on the internet but am still not quite sure how to show this in an Excel model.

Please would someone use the attached modell and show simplistically how this would be calculated.

I've inserted some assumed costs based on the 2009 basis year and provided some empty cells that could be used to show the nominal and real results.

Please feel free to attach you own model, but I would really appreciate someone showing the difference between the two and providing an good/basic explanation as to what the nominal and real results are showing, relative to the basis year used.

Thanks very much.

Attachments:

EE-Real---Nominal-Inflation.xls (16 KB)  (File Type Details) 

Real & Nominal Inflation Calculation Model

Answer : Excel Model Using Real & Nominal Inflation Rates

David,

Actually it's the other way :)

Real means without cpi - in the example I gave I kept costs flat real 2009 levels
Nominal means with cpi (ie inflated)

I have updated the exampe to make the year layout, and labelling clearer

Thats the vanilla example, where real numbers are escalated into nominal using cpi

It is also possible for costs to increase above cpi, ie increase in real costs plus inflation

An example is where labour is in short supply, real costs may increase over time (so total costs increase above the cpi rate)

I have added this example to the file

Cheers

Dave

Copy-of-EE-Real---Nominal-Inflat.xls (31 KB)  (File Type Details) 

file