$3,940 in 1918 has the same purchasing power as $6,784.11 in 1951. Over the 33 years this is a change of $2,844.11.

The average inflation rate of the dollar between 1918 and 1951 was 2.33% per year. The cumulative price increase of the dollar over this time was 72.19%.

## The value of $3,940 from 1918 to 1951

So what does this data mean? It means that the prices in 1951 are 67.84 higher than the average prices since 1918. A dollar in 1951 can buy 58.08% of what it could buy in 1918.

These inflation figures use the Bureau of Labor Statistics (BLS) consumer price index to calculate the value of $3,940 between 1918 and 1951.

The inflation rate for 1918 was 17.97%, while the inflation rate for 1951 was 7.88%. The 1951 inflation rate is higher than the average inflation rate of 3.10% per year between 1951 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 $3,940 in 1918

We can look at the buying power equivalent for $3,940 in 1918 to see how much you would need to adjust for in order to beat inflation. For 1918 to 1951, if you started with $3,940 in 1918, you would need to have $6,784.11 in 1918 to keep up with inflation rates.

So if we are saying that $3,940 is equivalent to $6,784.11 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 33 years.

## Value of $3,940 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 72.19%.

## Calculate Inflation Rate for $3,940 from 1918 to 1951

To calculate the inflation rate of $3,940 from 1918 to 1951, we use the following formula:

$$\dfrac{ 1918\; USD\; value \times CPI\; in\; 1951 }{ CPI\; in\; 1918 } = 1951\; USD\; value $$

We then replace the variables with the historical CPI values. The CPI in 1918 was 15.1 and 26 in 1951.

$$\dfrac{ \$3,940 \times 26 }{ 15.1 } = \text{ \$6,784.11 } $$

$3,940 in 1918 has the same purchasing power as $6,784.11 in 1951.

To work out the total inflation rate for the 33 years between 1918 and 1951, we can use a different formula:

$$ \dfrac{\text{CPI in 1951 } - \text{ CPI in 1918 } }{\text{CPI in 1918 }} \times 100 = \text{Cumulative rate for 33 years} $$

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

$$ \dfrac{\text{ 26 } - \text{ 15.1 } }{\text{ 15.1 }} \times 100 = \text{ 72.19\% } $$

## 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.