A bigger number can buy less
Distinguish nominal pay from inflation-adjusted purchasing power.
Materials: calculator page, paper or this response sheet, and a basic calculator. “Keep for comparison” preserves up to three scenarios while that calculator tab stays open.
Prepare the fictional setup
Click “Load example” in the calculator before starting. The first scenario is fictional and may intentionally show a difficult financial outcome.
Complete setup reference
| Today’s amount / price ($) | 1000 |
|---|---|
| Projection years | 10 |
| Assumed annual inflation (%) | 3 |
| Current annual salary ($) | 60000 |
| Assumed annual pay increase (%) | 2 |
| Starting C P I index | 260.474 |
| Ending C P I index | 324.054 |
Typed responses stay in this tab. Save a PDF to keep your work. Do not enter real household or student financial information.
Warm-up · 5 minutes
If your pay rises 2% and prices rise 3%, are you better able to buy the same basket?
Investigate · 25–40 minutes
Step 1
Load the inflation example. Compare nominal salary and salary in today’s dollars after ten years.
Step 2
Keep the scenario. Make the annual pay increase equal the inflation assumption. Describe the real-pay change.
Step 3
Use the historical CPI comparison with the same starting and ending index. Predict the result before reading it.
Step 4
Restore the saved December 2020 and December 2025 indexes. Explain why this historical comparison is not a future forecast.
Discuss & reflect · 10 minutes
Does lower inflation mean prices have returned to their old level?
Extension
Compare a hypothetical household’s food-heavy basket with an overall CPI measure. Explain why their experiences could differ.
Teacher guide and assessment
Expected reasoning
Equal compound rates preserve real pay. Identical CPI indexes leave the compared amount unchanged. Lower positive inflation means prices rise more slowly; it does not reverse previous price increases.
Use the calculator’s breakdown to check rounding. The teacher explanation is tied to the fictional setup above, not to any learner’s edited scenario.
Quick assessment · 6 points
- 2 points: accurate calculations with units and labeled scenarios.
- 2 points: explains how changing one assumption changes the result.
- 2 points: supports a conclusion with evidence and names a limitation.
Support: work through one scenario together and use a simple table. Challenge: ask the learner to find a counterexample or solve a target by hand. These are flexible suggested grade bands, not a standards-alignment claim.
Methods & sources
Formula explanations, assumptions and source links are on the calculator page. This is an educational activity, not a recommendation to borrow, invest or make a purchase.