Problems 57–62 require the following discussion. Inflation is a term used to describe the erosion of the purchasing power of money. For example, if the annual inflation rate is 3%, then $1000 worth of purchasing power now will have only $970 worth of purchasing power in 1 year because 3% of the original $1000(0.03 × 1000 = 30) has been eroded due to inflation. In general, if the rate of inflation averages r% per annum over n years, the amount A that $P will purchase after n years is A = P · (1 − r )n. where r is expressed as a decimal.

If the inflation rate averages 3%, what will be the purchasing power of $1000 in 2 years?