A small change. A clearer picture.
Economics becomes easier to understand when you can change an assumption yourself. These two experiments show the arithmetic behind prices and borrowing.
Purchasing power
Follow the cost of the same basket over time.
Borrowing costs
Compare the monthly payments on two loan rates.
Illustrative assumptions, not forecasts. Your entries stay on this page.
What will the same money buy?
Change the assumptions to see compounding at work. Your entries stay on this page.
Something that costs $100.00 now would cost $115.93 after 5 years at 3% annual inflation.
YOUR MONEY'S PURCHASING POWER$86.26 in today's dollars
Keeping $100.00 unchanged would buy what $86.26 buys today.
Slower inflation still means higher prices.
At a positive inflation rate, prices keep rising. A drop from 4% to 2% means they rise more slowly. Prices fall in this example only when the inflation rate is negative.
Assumptions and formula
Future cost = amount × (1 + annual inflation ÷ 100)years. Purchasing power = amount ÷ that same growth factor. The rate stays constant; there is no interest earned or change in what you buy. Fractional years use the equivalent compounded factor.