Understanding Inflation: Changes in Purchasing Power

Purchasing Power of the Consumer Dollar 1913-2017

“Inflation is taxation without legislation.” – Milton Friedman

Why does your monthly rent today cost just as much as the down payment your grandparent’s put on their home 70 years ago? The answer is inflation. Economics Professor Robert Lawson explains how inflation is essentially the change in the purchasing power of your money (i.e. how many tacos can you buy with, say, $20 today as compared to a decade ago).

When inflation occurs, you’re able to buy fewer goods and services with the same amount of money. And when inflation really picks up, it can have catastrophic economic consequences.

Watch Professor Lawson below to learn more:

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