$7 in 1920 has the same purchasing power as $6.27 in 1921. Over the 1 year this is a change of $-0.74.

The average inflation rate of the dollar between 1920 and 1921 was 2.55% per year. The cumulative price increase of the dollar over this time was -10.50%.

## The value of $7 from 1920 to 1921

So what does this data mean? It means that the prices in 1921 are 10.50% lower than the average prices since 1920. A dollar in 1921 can buy 111.73% of what it could buy in 1920.

These inflation figures use the Bureau of Labor Statistics (BLS) consumer price index to calculate the value of $7 between 1920 and 1921.

The inflation rate for 1920 was 15.61%, while the inflation rate for 1921 was -10.50%. The 1921 inflation rate is lower than the average inflation rate of 2.83% per year between 1921 and 2021.

## USD Inflation Since 1913

The chart below shows the inflation rate from 1913 when the Bureau of Labor Statistics' Consumer Price Index (CPI) was first established.

## The Buying Power of $7 in 1920

We can look at the buying power equivalent for $7 in 1920 to see how much you would need to adjust for in order to beat inflation. For 1920 to 1921, if you started with $7 in 1920, you would need to have $6.27 in 1920 to keep up with inflation rates.

So if we are saying that $7 is equivalent to $6.27 over time, you can see the core concept of inflation in action. The "real value" of a single dollar decreases over time. It will pay for fewer items at the store than it did previously.

In the chart below you can see how the value of the dollar is worth less over 1 year.

## Value of $7 Over Time

In the table below we can see the value of the US Dollar over time. According to the BLS, each of these amounts are equivalent in terms of what that amount could purchase at the time.

## US Dollar Inflation Conversion

If you're interested to see the effect of inflation on various 1950 amounts, the table below shows how much each amount would be worth today based on the price increase of -10.50%.

## Calculate Inflation Rate for $7 from 1920 to 1921

To calculate the inflation rate of $7 from 1920 to 1921, we use the following formula:

$$\dfrac{ 1920\; USD\; value \times CPI\; in\; 1921 }{ CPI\; in\; 1920 } = 1921\; USD\; value $$

We then replace the variables with the historical CPI values. The CPI in 1920 was 20 and 17.9 in 1921.

$$\dfrac{ \$7 \times 17.9 }{ 20 } = \text{ \$6.27 } $$

$7 in 1920 has the same purchasing power as $6.27 in 1921.

To work out the total inflation rate for the 1 year between 1920 and 1921, we can use a different formula:

$$ \dfrac{\text{CPI in 1921 } - \text{ CPI in 1920 } }{\text{CPI in 1920 }} \times 100 = \text{Cumulative rate for 1 year} $$

Again, we can replace those variables with the correct Consumer Price Index values to work out the cumulativate rate:

$$ \dfrac{\text{ 17.9 } - \text{ 20 } }{\text{ 20 }} \times 100 = \text{ -10.50\% } $$

## Inflation Rate Definition

The inflation rate is the percentage increase in the average level of prices of a basket of selected goods over time. It indicates a decrease in the purchasing power of currency and results in an increased consumer price index (CPI). Put simply, the inflation rate is the rate at which the general prices of consumer goods increases when the currency purchase power is falling.

The most common cause of inflation is an increase in the money supply, though it can be caused by many different circumstances and events. The value of the floating currency starts to decline when it becomes abundant. What this means is that the currency is not as scarce and, as a result, not as valuable.

By comparing a list of standard products (the CPI), the change in price over time will be measured by the inflation rate. The prices of products such as milk, bread, and gas will be tracked over time after they are grouped together. Inflation shows that the money used to buy these products is not worth as much as it used to be when there is an increase in these products’ prices over time.

The inflation rate is basically the rate at which money loses its value when compared to the basket of selected goods – which is a fixed set of consumer products and services that are valued on an annual basis.