Deterministic simulation
The year 2022 saw record high inflation. There are many ways to think about what inflation in the future will be. In this exercise, you'll attempt to estimate future inflation using a deterministic model.
Recall that deterministic models do not include any randomness and allow you to calculate the outcome of a future event exactly. In the next exercise, you'll use a Monte Carlo simulation, which is stochastic. Throughout these exercises, consider which simulation—deterministic or stochastic—is more appropriate for estimating inflation.
For this example, assume the inflation rate was 8.6% in 2022 and that there is a steady increase of 2% for inflation in each year following. Using these assumptions, what will the inflation rate be in 2050?
This exercise is part of the course
Monte Carlo Simulations in Python
Exercise instructions
- Using the
deterministic_inflation()function defined in the editor, estimate inflation in 2050.
Hands-on interactive exercise
Have a go at this exercise by completing this sample code.
def deterministic_inflation(year, yearly_increase_percent):
inflation_rate = 8.6
inflation_rate = inflation_rate*((100+yearly_increase_percent)/100)**(year-2022)
return(inflation_rate)
# Print the deterministic simulation results
print(____)