First of all I am new to Economics. I'm a B.Sc.(Mathematics) final year student. I was curious to learn Economics so I started with "Economics in one lesson" by Henry Hazlitt.
In this book I encountered few phrases like 'inflation' and 'purchasing power'. On Wikipedia I started reading about purchasing power. I was even unable to understand its first paragraph. The first para goes like:
Purchasing power (sometimes retroactively called adjusted for inflation) is the number and quality or value of goods and services that can be purchased with a unit of currency. For example, if one had taken one unit of currency to a store in the 1950s, it is probable that it would have been possible to buy a greater number of items than would be the case today, indicating that one would have had a greater purchasing power in the 1950s. Currency can be either a commodity money, like gold, silver and bitcoin, or fiat money emitted by government sanctioned agencies.
Suppose I have 10,000 in the year 2000 and at the same time my friend also have 10,000. We both wanted to save this money for future. I decided to put this cash in my lock whereas my friend decided to buy gold of it. For simplicity say my friend bought 1 kg of gold.
Now in year 2010, after 10 years, due to inflation, our purchasing power is reduced. Now my question is that in this 10 year period due to inflation the price of gold is also high, so for the same amount of 10,000 my purchasing power is reduced much more than my friend's. Why or how?
As I said I'm new to Economics so please be simple while explaining.
Any suggestions for further reading will also be appreciated.