Glossary term
Inflation
Inflation is the rate at which prices rise, reducing the purchasing power of a fixed dollar amount over time.
Plain meaning
What inflation means
Inflation means the same dollar amount may buy less in the future. A $10,000 expense today may require more than $10,000 later if prices rise.
Formula role
How OpenBook uses it
Projection calculators can use inflation to grow expenses, goals, income targets, home prices, education costs, or retirement spending. Investment calculators may use inflation to convert nominal return into real return.
Common confusion
Inflation is an assumption in projections
Historical inflation, current inflation, central-bank target inflation, and long-term planning assumptions can differ. OpenBook calculators state which inflation assumption is being used where the term affects the result.
Primary references