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# Inflation Rate

## Future value of money vs. inflation.

• An inflation with rising prices will decrease the value of money over time
• A deflation - the opposite of inflation or negative inflation - with decreasing prices will increase the value of money over time

### Inflation Rate

The future value of money after periods with uniform inflation rates can be expressed as

F = P (1 - i)n          (1)

where

F = future value

P = present value

i = average inflation (or deflation) rate per period (positive for inflation, negative for deflation)

n = number of periods

### Example - Inflation and Future Value

The future value of an amount of 100 after 10 periods and 4% of inflation rate can be calculated as

F = 100 (1 - 0.04)10 =

= 66.5

### Future Value of Present Money due to Inflation Rate - Calculator Table

This calculated table visualizes the decrease in future value of present money due to inflation rate and time.

Present Value of Money

Start Year

End Year

Max. Inflation Rate (%)

### Download and print Inflation chart - Future Value vs. Present Value and Inflation Rate

### Variable Inflation Rate

The future value of money after periods with variable inflation rates can be calculated as

F = P (1 - i1) (1 - i2) ...... (1 - in)                  (2)

where

i1..n = inflation rates of terms

The average inflation rate for all periods can be calculated as

(1 - ia)n = (1 - i1) (1 - i2) ...... (1 - in)                (3)

or

ia = 1 - [(1 - i1) (1 - i2) ...... (1 - in)]1/n                    (3b)

where

ia = average inflation rate

## Related Topics

• Economics - Engineering economics - cash flow diagrams, present value, discount rates, internal rates of return - IRR, income taxes, inflation.

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## Citation

• Engineering ToolBox, (2008). Inflation Rate. [online] Available at: https://www.engineeringtoolbox.com/inflation-rate-d_1236.html [Accessed Day Mo. Year].

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