Starting Value:
Current Value: 10000.00
Purchasing Power Lost: 0.00%
Time Elapsed: 0 seconds
Visualize how inflation affects your purchasing power over time
Inflation is the rate at which the general level of prices for goods and services rises, causing purchasing power to fall over time. Central banks try to limit inflation to keep the economy running smoothly.
The simulation above shows how the value of your money decreases in terms of what it can buy (purchasing power), not that your actual money is decreasing in nominal terms.
The average inflation rate in the United States over the past 30 years has been approximately 2.5%. The Federal Reserve typically targets a 2% inflation rate as optimal for economic growth.
Common strategies to combat inflation include investing in stocks, real estate, inflation-indexed bonds (TIPS), commodities, and other assets that typically increase in value during inflationary periods.
Inflation can be caused by increased production costs, higher demand for goods and services, expansion of the money supply, or fiscal policies. These factors can work individually or in combination.
When inflation outpaces wage growth, people's purchasing power decreases. Ideally, wages should rise at least at the rate of inflation to maintain the same standard of living.
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