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19. Inflation causes things to cost more, and for our money to buy less (hence yourgrandparents saying, "In my day, you could buy a cup of coffee for a nickel").Suppose inflation decreases the value of money by 5% each year. In other words, ifyou have $1 this year, next year it will only buy you $0.95 worth of stuff. How muchwill $100 buy you in 20 years?

19 Inflation causes things to cost more and for our money to buy less hence yourgrandparents saying In my day you could buy a cup of coffee for a nickelSuppose class=

Respuesta :

Given the inflation rate of the value of item:

Let V = value of the money

after 20 yrs

In you have $1 this year, next it will only buy $0.95 item.

Using an exponential expression:

[tex]1-0.05=0.95[/tex][tex]\begin{gathered} V=100(0.95)^{20} \\ V=100(0.3585) \\ V=35.85 \end{gathered}[/tex]

Therefore

In 20 yrs $100 is worth $35.85

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