How do I calculate inflation over time?
To project an amount forward with a flat annual inflation rate, use amount at end = amount at beginning × (1 + rate)^n, where n is the number of years. This calculator does that automatically and also shows the nominal increase, total cumulative inflation, and purchasing power loss.
How do I calculate inflation backward (in reverse) to find the equivalent amount at the beginning?
To run inflation backward, divide the amount at the end by (1 + rate)^n. This gives the amount at the beginning with the same purchasing power. Use the radio next to Amount at the beginning when that is the value you want to calculate.
Can I calculate the average inflation rate between two amounts?
Yes. If you know the amount at the beginning, the amount at the end, and the time period, the average inflation rate is (end / beginning)^(1 / n) - 1. Select the radio next to Average inflation rate to solve for that value.
What is the difference between increase, total cumulative inflation, and purchasing power loss?
Increase is the nominal amount difference between the beginning and end values. Total cumulative inflation is the total percentage increase in prices over the full period. Purchasing power loss shows how much buying power has fallen over that same time.
Example: what happens to 1,000 over 5 years at 3% inflation?
At an average inflation rate of 3% for 5 years, 1,000 grows to about 1,159.27. The nominal increase is 159.27, total cumulative inflation is about 15.93%, and purchasing power loss is about 13.74%.
