Assume the rate of inflation is 5 % per year for the next 2 years. What will be the cost of goods 2 years from now, adjusted for inflation, if the goods cost $280.00 today?

@Jimthompson5910

The equation for inflation is

A = P * (1+r) ^t

which is an exponential growth equation (if r > 0). If r < 0, then we have deflation.

where ...

A = final price after t years

P = initial starting price

r = rate of inflation in decimal form

t = number of years

In this case,

A = unknown (we're solving for this)

P = 280 is the starting price

r = 0.05 is the decimal form of 5%

t = 2 years

We will plug these three pieces of info into the formula to get ...

A = P * (1+r) ^t

A = 280 * (1+0.05) ^2

A = 280 * (1.05) ^2

A = 280 * (1.1025)

A = 308.70

Answer: 308.70 dollars