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Economic Concepts Guides

Understand economic forces that move markets. Learn how inflation, interest rates, GDP, and Federal Reserve policies affect your investments.

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Economic Concepts

How Inflation Affects Your Money (with Examples)

$100 in the year 2000 would need to be $182 today to buy the same basket of goods — that's what 25 years of ~3% average inflation does. If you kept that $100 in a savings account earning 0.5%, it grew to just $113. You lost purchasing power even though the number went up. This guide shows exactly how inflation works with real numbers, how it's measured, what causes it, and how different investments — stocks, bonds, cash, real estate, gold — perform when prices are rising.

Beginner13 min read

Frequently Asked Questions

Inflation reduces the purchasing power of money over time. Stocks have historically outpaced inflation over long periods, making them a common hedge. Fixed-income investments like bonds may lose real value during high-inflation periods.

Higher interest rates increase borrowing costs for companies (reducing profits), make bonds more attractive relative to stocks, and can slow economic growth. Lower rates tend to have the opposite effect, generally supporting stock prices.

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