Inflation Problems 57–62 require the following discussion. Inflation is a term used to describe the erosion of the purchasing power of money. For example, if the annual inflation rate is 3%, then \(1000 worth of purchasing power now will have only \)970 worth of purchasing power in 1 year because 3% of the original \(1000 (0.03 * 1000 = 30) has been eroded due to inflation. In general, if the rate of inflation averages r per annum over n years, the amount A that \)P will purchase after n years is $A=P{\left(1-r\right)}^n$

where $r$is expressed as a decimal.

Inflation If the inflation rate averages 2%, how much will $1000 purchase in 3 years?

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