If inflation decreases the value of money by 2% each year, it means that the value of money is reduced by 2% annually. Therefore, in 20 years, the value of money will be reduced by 2% x 20 = <<2*20=40>>40%.
This means that $100 will only be able to buy 100% - 40% = 60% of its original value in 20 years.
Therefore, $100 will be able to buy $100 x 60% = $<<100*60*.01=60>>60 worth of stuff in 20 years.
Inflation causes things to cost more, and for our money to buy less (hence your grandparents saying “In my day, you could buy a cup of coffee for a nickel”). Suppose inflation decreases the value of money by 2% each year. In other words, if you have $1 this year, next year it will only buy you $0.98 worth of stuff. How much will $100 buy you in 20 years?
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