The purchasing power of a dollar, which is the amount of goods and services that a dollar buys, determines its value. Inflation is the increase in the prices of goods and services over time as measured by a percentage increase each year. As inflation increases, the value of the dollar decreases, since a consumer cannot buy as much with $10 as he did in the past.
To put the figures in perspective, consider the average costs of consumer goods in 1930. The average annual income in the United States was $1,970. A new house cost a little over $7,000, and the average cost of a new car was $640.
In the 1930s, $10 in grocery money easily covered items such as a pound of steak at 20 cents, a dozen eggs at 18 cents, bacon at 38 cents per pound and toilet paper at 9 cents for two rolls. Gas in 1930 was 10 cents a gallon and new tires cost $3.69. Clothing prices were much cheaper than present day: a girl's dress cost about $3, as did a silk lined hat.Learn more about Currency & Conversions