Answer: To calculate the real value of your savings after inflation, you need to adjust your savings for the increase in the price level. Here's how to do it:
Calculate the amount of inflation:
Inflation rate = (New price level index - Old price level index) / Old price level index
In this case, the old price level index is 100, and the new price level index is 109 (100 + 9%). So:
Inflation rate = (109 - 100) / 100 = 0.09
Adjust your savings for inflation:
Real value of savings = Nominal value of savings / (1 + inflation rate)
In this case:
Real value of savings = 8,295 / (1 + 0.09) = 7,614.22
Therefore, the real value of your savings after inflation is $7,614.22.
Explanation: