Question

An economist has predicted 2% inflation during the next 10 years. how much will an item that presently sells for 100 cost in 10 years?

Answer 1

Answer:

With 2% inflation during the next 10 years, an item that presently sells for 100 will cost 102 in 10 years' time.

Explanation:

However, if the predicted inflation rate of 2% happens year on year, then the cost of the item will become 121.90 (100 (1+ 2%)∧10), compounded annually.  In itself, inflation is the decline of the purchasing power of a given currency over some period of time.   It is a quantitative measure of the rate at which the decrease in the purchasing power of the selected currency occurs, and how this is reflected in the price level of a basket of selected goods and services in that economy over some period of time.