In 'playing' with this control you will soon become aware of the very considerable impact that even low inflation rates can have on the value of investments. Try the accounts example file inflation_example.acc. This shows an investment of $1000 in the Primary Account set with an interest rate of 5%. Over a period of 20 years the value of the investment increases to $2,653. However, if you click both the Inflation and Todays Values controls, you will see that the effect of the 3% inflation rate is to reduce the 20 year value to just $1,469. And remember 3% is still considered a low inflation rate (see historical inflation data).

Setting the inflation rate

• Click Inflation button DOWN - inflation is included in all account calculations.
• Click Inflation button UP - inflation is excluded from all account calculations
• Type in a value for inflation rate and confirm by pressing Enter key.
• Click spin control to raise or lower the inflation rate value by 0.1 (or 0.01 if you click while holding down the shift key).
• Click Today's Values button DOWN - all calculated amounts for future years are shown with the purchasing value they would have today. When this button is DOWN you are looking at the real effects of inflation.
• Click Today's Values button UP - although inflation may be present, all amounts for future years are shown with their nominal value*. When this button is UP the effects of inflation are hidden from you - and of course in 'real-life' the Today's Values button is always UP.

  * If today you had a $100 note in your pocket - in a year's time it would still have '$100' printed on it, even if there had been 10% inflation over that period. That is equivalent to having the Today's Values button UP. The currency, nominally, has retained the same value. However, the economic reality, that your $100 will only purchase goods to the value of $90.91 at today's prices, remains hidden from you, until, that is, you actually go and buy the goods at their new inflated prices.