Inflation Definition

Inflation is the rate at which the cost of living increases-in other words, it’s the rate at which the purchasing power of money is decreasing. For example, if the inflation rate is 2% for the year, a candy bar that cost $1 at the beginning of the year will cost $1.02 at the end of the year. That might not sound so bad, but if the annual rate of inflation continues at 2% each year, in twenty years when your kid is buying a candy bar for your grandkid it will cost $1.49. So the next time your grandpa complains, "When I was a boy a dime really meant something" he’s telling the truth; and you can look forward to the time when you’ll be able to complain to your grandkids, "When I was a boy a hundred dollar bill really meant something".