Excuse the weird title, but I think a. Example should make it clearer, when people say: person A had money in 1900, say 100,000$, that is equal to 1,000,000$ in todays money?
How does that work?
Or what do they mean exactly?
Like if my Great grandfather had 1 million that remained untouched till this day shouldn’t that 1 million remain as a 1 million even today?
In: Economics
*Prices* change over time. In general, they get higher. This is called inflation, and there are many places you can learn about why/how it happens.
Money indeed stays the same over time, but inflation means that the amount it can buy is changing. In your example, the $1 million saved by your great grandfather purchases less now than it does the day he set it aside because prices have risen since that day.
Suppose a gallon of milk used to cost 10 cents but now costs 2 dollars. Your great grandfather could buy 10,000,000 gallons of milk with that money. You can buy 500,000. In order for you to buy the same amount of milk as your great grandfather, you would need $20 million. That’s the sense in which people will talk about a certain amount of money in the past being equivalent to a larger amount today.
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