Introduction to inflation and deflation
In simple terms, inflation means increase in the price of essential goods and services. It means decrease in the value of money; every dollar that you spend brings you less and less goods and services when compared to the past. In short, the dollar’s purchasing power reduces over time. The basic reason for inflation is increase in the supply of money, i.e., ‘too much money chasing too few goods’. Inflation is a sign of growing economy.
On the other hand, deflation is the opposite of inflation. When the price of goods and services decreases and inflation is negative (i.e., below 0%), it is called deflation. Prima facie deflation looks beneficial to the individuals as the prices decrease and the purchasing power of the dollar increases, but it has its own negative impacts on the economy. For example, deflation causes increase in unemployment which in turn causes economic slowdown. Many economists consider deflation as a bigger threat to the economy than inflation because deflation is more difficult to control.
The Federal Reserve of United States (often simply referred as ‘the Fed’) adjusts its policies from time to time to protect the economy from deflation and hyperinflation.
How to use Inflation Calculator
You might have heard your parents / elders saying how much it cost to purchase a loaf of bread or a burger or a cup of coffee in their times. Does it ever make you curious about knowing or comparing the value of dollar of different periods? If yes, our calculator will give you an easy solution to do this comparison.
The U.S. inflation calculator lets you compare the ‘dollar’ of two different periods and tells you the change in cost and average inflation for the given period. It shows the purchasing power of the dollar over time. If you are curious to compare the purchasing power of dollar for two different periods, then our calculator will let you know that easily. Just enter any two dates (in years) between 1913 and the current year and the dollar amount. Immediately you will get the information showing purchasing power of dollar for those two years along with the percentage change in cost and average inflation during that period. You can change the years using the slider and thus compare the inflation rate of different periods (starting from 1913).
Our data source
U.S. inflation calculator is based on historical Consumer Price Index– All Urban Consumers (CPI-U) data from 1913 to Present provided by U.S. Bureau of Labor Statistics to calculate inflation. Major groups of goods and services covered by CPI include the following:
- Food & Beverages – Breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks
- Housing – Rent of primary residence, owners’ equivalent rent, fuel oil, bedroom furniture
- Apparel – Men’s shirts and sweaters, women’s dresses, jewelry
- Transportation – New vehicles, airline fares, gasoline, motor vehicle insurance
- Medical Care – Prescription drugs and medical supplies, physicians’ services, eyeglasses and eye care, hospital services
- Recreation – Televisions, toys, pets and pet products, sports equipment, admissions
- Education & Communication – College tuition, postage, telephone services, computer software and accessories
- Other Goods & Services – Tobacco and smoking products, haircuts and other personal services, funeral expenses
CPI also covers certain fees and taxes directly associated with the purchase of specific goods and services.
Inflation and deflation in the U.S.
U.S. has experienced much inflation in the last century because prices tend to rise as a by-product of economic growth. United States has never experienced hyperinflation but it was exposed to high inflation twice – during the revolutionary war (1779) and the civil war (1861-1865). U.S. economy experienced quite a lengthy deflation during the era of great depression (1928 -1933).