How Does Inflation Affect Prices?
The consumer price index (CPI) measures the average price for a group of goods and services you and other consumers buy routinely. Energy prices make up about a tenth of the CPI; food prices make up about one-fifth of the index. Play with this calculator (don’t use commas when entering thousands) to see how inflation affects purchases. Say your house cost $150,000 in 2000. Inflation alone would make it worth about $179,000 in 2007. If your latest appraisal shows your house worth more than that, it’s appreciated beyond inflation. If your latest assessment shows it worth less, then your investment has not kept pace with inflation.
