How can inflation affect your saved up money?

Question

okay lets say i have saved up $3000 ...is not in the bank of anything..i have it cash right? so each year that goes by, how will inflation affect that money...okay to make it easier lets say i have this money from 2006 to 2008....so how much would i really have now after inflation effect

NOTE: Answer according to U.S Present Economy

Answer 1

Inflation appears when people spend too much, causing the prices of commodities to be on the rise (inflation),. If the inflation is too high, the government must take action and increase interest rates so people will spend less (because people won't borrow as much if interest charged is high), which will make inflation go down. Your purchasing parity during inflation will decrease, since for the same dollar, you'll have less. So say with your 3000 what you could buy in 2006 was worth 3000 of stuff, today you'll only have 2500 (example) for the same cost. Before you had 3000.

2006= 3000 bags of flour = 3000$

2007= 2750 bags of flour = 3000$

2008= 2500 bags of flour = 3000$

I hope this makes some sort of sense to you,

-Sarah