Inflation Problems 57-62 require the following discussion. Inflation is a term used to describe the erosion of the purchasing power of money. For example, if the annual inflation rate is 3 % , then $ 1000 worth of purchasing power now will have only $ 970 worth of purchasing power in 1 year because 3 % of the original $ 1000 ( 0.03 × 1000 = 30 ) has been eroded due to inflation. In general, if the rate of inflation averages r per annum over n years, the amount A that $ P will purchase after n years is A = P · ( 1 − r ) n where r is expressed as a decimal. Inflation If the inflation rate averages 3 % , how much will $ 1000 purchase in 2 years?
Inflation Problems 57-62 require the following discussion. Inflation is a term used to describe the erosion of the purchasing power of money. For example, if the annual inflation rate is 3 % , then $ 1000 worth of purchasing power now will have only $ 970 worth of purchasing power in 1 year because 3 % of the original $ 1000 ( 0.03 × 1000 = 30 ) has been eroded due to inflation. In general, if the rate of inflation averages r per annum over n years, the amount A that $ P will purchase after n years is A = P · ( 1 − r ) n where r is expressed as a decimal. Inflation If the inflation rate averages 3 % , how much will $ 1000 purchase in 2 years?
Solution Summary: The author explains that inflation is a term used to describe the erosion of the purchasing power of money.
Inflation
Problems 57-62 require the following discussion.
Inflation
is a term used to describe the erosion of the purchasing power of money. For example, if the annual inflation rate is
, then
worth of purchasing power now will have only
worth of purchasing power in 1 year because
of the original
has been eroded due to inflation. In general, if the rate of inflation averages
per annum over
years, the amount
that
will purchase after
years is
where
is expressed as a decimal.
Inflation
If the inflation rate averages
, how much will
purchase in 2 years?
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