Inflation Calculator
Calculate inflation rate, purchasing power, and price changes over time
Calculate Inflation
Starting price of goods/services
Current price of goods/services
Inflation Results
Formula used: Inflation Rate = ((Final Price - Initial Price) / Initial Price) × 100
0Impact: Money gains purchasing power (deflation)
Economic Impact Analysis
Example Calculation
Coffee Price Inflation (2020-2024)
Scenario: Price of a coffee cup over 4 years
2020 Price: $3.50
2024 Price: $4.20
Time Period: 4 years
Calculation
Inflation Rate = ((4.20 - 3.50) / 3.50) × 100
Inflation Rate = (0.70 / 3.50) × 100
Inflation Rate = 20.00%
Annual Rate ≈ 4.65% per year
Types of Inflation
Mild Inflation
0-2% annually
Healthy economic growth
Moderate Inflation
2-10% annually
Manageable price increases
High Inflation
10%+ annually
Economic instability
Inflation Tips
Track Consumer Price Index (CPI) for accurate rates
Central banks target 2% annual inflation
Invest in assets that hedge against inflation
Deflation can be as harmful as high inflation
Understanding Inflation
What is Inflation?
Inflation is the sustained increase in the general price level of goods and services in an economy over time. When inflation occurs, each unit of currency buys fewer goods and services, effectively reducing the purchasing power of money.
Why Does Inflation Matter?
- •Erodes purchasing power of savings and wages
- •Affects investment and retirement planning
- •Influences central bank monetary policy
- •Impacts cost of living and standard of living
Inflation Formula
Inflation Rate = ((Final Price - Initial Price) / Initial Price) × 100
- Final Price: Current price of goods/services
- Initial Price: Previous price of goods/services
- Result: Percentage change in price level
Note: Negative inflation rate indicates deflation, where prices are decreasing over time.
Common Causes
- ↗Demand-Pull: High consumer demand exceeds supply
- ↗Cost-Push: Rising production costs (wages, materials)
- ↗Monetary: Increased money supply in circulation
- ↗External: Oil price shocks, supply chain disruptions
Economic Effects
- ⚠Purchasing Power: Decreases over time
- ⚠Interest Rates: Central banks may raise rates
- ⚠Savings: Real value of savings decreases
- ⚠Uncertainty: Makes long-term planning difficult