when inflation occurs a consumer must pay more for a fixed quantity of goods or services theoretically this is why savvy investors seek to hold a significant portion of their income in investments with a 2 return in that case with inflation at 2 they would be able to maintain their purchasing power at a constant level 
for instance assume a consumer spends approximately 100 per month for a total of 1 200 per year on food during a year when inflation is rising at an annual rate of 1 also assume that the consumer saw no change in their wages a consumer with a 60 000 annual nominal salary would have lost approximately 600 of purchasing power over a year or one cent per dollar spent due to the effects of inflation in terms of their food purchases this means the same quantity of food cost them 12 more during the current year compared to the past year alternatively if this consumer isn t following a strict food budget they will likely spend approximately 101 per month or 1 212 to get the same amount of food they would have bought in the previous year 