Question

For every dollar's worth of goods and services bought today, the amount of money it will take in n years to buy the same amount of goods and services when the average future inflation rate is peis called the ________.

Answer 1

The amount of money needed in the future to purchase the same goods and services as today, considering an average inflation rate, is known as the future value of a dollar against inflation. Economists use index numbers and inflation rates to predict changes in purchasing power.

Step-by-step explanation:

For every dollar's worth of goods and services bought today, the amount of money it will take in n years to buy the same amount of goods and services when the average future inflation rate is p is called the future value of a dollar considering inflation.

Economists measure the inflation rate as the percentage change between price levels or index numbers over time. These index numbers transform the cost of buying a basket of goods and services into a series of numbers in the same proportion to each other, with an arbitrary base year of 100. Inflation causes a decline in the purchasing power of money, meaning that you will need more money to buy the same amount of goods in the future compared to today.

To calculate the amount you would need in n years to purchase the same goods:

Start with the original cost of the goods or services.

1. Use the general equation for percentage change to determine the change in cost over time.
2. Apply the average future inflation rate p to calculate the future cost.

Answer 2

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