More money is needed to buy the same goods over time and that's called inflation. The freeware Palm program InflationMaster uses the inflation rate for any given year to calculate either forwards or backwards. John Mayo-Smith has updated InflationMaster to version 2.8. This newest version, released February 19, 2006, has data to include years 1810 through 2006. InflationMaster uses official data from the United States Federal Reserve, and the data for 2006 is based on the Federal Reserve's estimates. In fact, included in the download for InflationMaster is InflationStats.txt. This file contains the rates of inflation used in the software. This is handy if you wish to have students "go behind the scenes" to analyze how InflationMaster does its calculations.
Here's how InflationMaster works: I input 1810 for Year 1. Then I tap the button for Amount 1 and input 10 for $10. Next, I tap the Year 2 button and input 2006. After tapping the Calculate Amount 2 button, InflationMaster displays 126.211. This number means that $10 in 1810 would be worth $126.21 in today's dollars.
I have some problems for you (or your students) to solve using InflationMaster:
- Babe Ruth’s salary was $75,000 in 1930. How much would that be today?
- A new car in 2004 was $16,900. How much would you expect to pay for a new car in 1962?
- If your grandparents paid $21,400 for their house in 1949, what is the very minimum amount you would expect it to be worth in 2000 when they sold it?
- Besides somewhat straight-forward problems, students can experiment with InflationMaster to find periods of time when inflation was at a higher rate or when deflation occurred, like during the Great Depression. Use InflationStats.txt to help you out.
- What are some factors that cause prices to go up or down?
- How do price increases affect different parts of society?
- What things appreciate at different rates?