Source: qrc.depaul.edu
Think back a few years. How much did a gallon of gasoline cost then? A loaf of bread? A 10 inch sausage pizza? A movie ticket? Almost undoubtedly these items now cost more in dollar terms. There is a tendency for prices of most goods to increase, even goods that have no obvious quality improvement. This general price increase is called inflation, and it matters to us all, because unless our incomes rise to match the increases in the goods we need to live, we are not as well-off as we were before. Inflation is also critical to financial planning because $100 to be received in the future (e.g. at retirement) will undoubtedly be worth less than $100 received today. But the matter is complicated because prices fluctuate, quality varies, and buying patterns change.
