What Is Purchasing Power? Meaning & Example

Inflation is the general rise in prices across an economy over time, which reduces what each unit of money can buy. Moderate inflation is normal, while high inflation erodes savings quickly.

Real return is your investment return after subtracting inflation. It shows how much your purchasing power actually grew.

The Consumer Price Index tracks the average change in prices paid by consumers for a basket of goods and services. It is one of the most watched measures of inflation.