About Inflation
Inflation is the rate at which the general level of prices for goods and services rises, and subsequently, the purchasing power of currency falls. Central banks attempt to limit inflation to keep the economy running smoothly.
Why Inflation Matters
- Purchasing Power: Inflation reduces what your money can buy over time
- Investment Returns: Real returns = Nominal returns - Inflation rate
- Retirement Planning: Future expenses will be higher due to inflation
- Salary Growth: Salaries need to keep pace with inflation to maintain living standards
Inflation Calculation Formula
FV = PV × (1 + r)n
Where:
- FV = Future Value
- PV = Present Value
- r = Inflation Rate
- n = Number of Years