Question

measures of a decrease in value of money

Answer 1

The impact that inflation has on the time value of money is it decreases the value of a dollar over time. The time value of money is a concept that describes how the money available to you today is worth more than the same amount of money at a future date. This also assumes you do not invest the money available to you today in an equity security, a debt instrument or an interest-bearing bank account. Essentially, if you have a dollar in your pocket today, that dollar will be worth less one year from today if you keep it in your pocket.

Inflation increases the prices of goods and services over time, effectively decreasing the amount of goods and services you can buy with a dollar in the future as opposed to a dollar today. If wages remain the same but inflation causes the prices of goods and services to increase over time, it will take a larger percentage of your income to purchase the same good or service in the future.

So, for example, if an apple costs $1 today, it's possible that it could cost $2 for the same apple one year from today. This effectively decreases the time value of money, since it will cost twice as much to purchase the same product in the future. To mitigate this decrease in the time value of money, you can invest the money available to you today at a rate equal or higher than the rate of inflation. (For related reading, see

Answer 2

The impact that inflation has on the time value of money is it decreases the value of a dollar over time. The time value of money is a concept that describes how the money available to you today is worth more than the same amount of money at a future date. This also assumes you do not invest the money available to you today in an equity security, a debt instrument or an interest-bearing bank account. Essentially, if you have a dollar in your pocket today, that dollar will be worth less one year from today if you keep it in your pocket.

Inflation increases the prices of goods and services over time, effectively decreasing the amount of goods and services you can buy with a dollar in the future as opposed to a dollar today. If wages remain the same but inflation causes the prices of goods and services to increase over time, it will take a larger percentage of your income to purchase the same good or service in the future.

So, for example, if an apple costs $1 today, it's possible that it could cost $2 for the same apple one year from today. This effectively decreases the time value of money, since it will cost twice as much to purchase the same product in the future. To mitigate this decrease in the time value of money, you can invest the money available to you today at a rate equal or higher than the rate of inflation. (For related reading, see

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