We all experience changing prices.

We all know a dollar is worth less today than it was five years ago. But can we get a better answer to "What is a dollar worth?" than “we can buy less today”?

From one perspective, the answer depends on the rate of inflation. Inflation, a word we haven’t heard much about in the past few months and frequently described by the consumer’s price index (CPI), continues to remain low. Some actually worry it is too low. The current rate is running below the Federal Reserve’s target of 1.5 to 2 percent. The sluggish real estate market and declining home prices, stubbornly high rate of unemployment, cautious consumer spending and stock market declines could cause the rate of inflation to fall even further, raising the risk of deflation — falling prices. Economists agree this would cause new problems for the U.S. economy.

What causes inflation? The simple economic answer is demand for goods and services increases such the supply will increase only if prices rise. However, the causes of inflation are far more complex. The rate of price increases can also be impacted by the level of government spending, budget deficits, low interest rates and the overall growth rate of the economy. The first three point to the expectation that prices will rise. The Federal Reserve is doing a delicate balancing act of keeping interest rates low to spur economic growth and, at the same time, trying to predict when they should start raising rates to head-off inflation. How many of you remember the 1970s — a time of high inflation and high interest rates?

Inflation can also be impacted by foreign currency rates. Recently, the dollar “strengthened” relative to the euro, Japanese yen and Canadian dollar. It now takes fewer U.S. dollars to buy goods priced in these currencies. For example, a few months ago it cost nearly $1.40 U.S. dollars to buy a commodity priced at one euro. That same one euro commodity can be bought today for about $1.25.

While that is good news for those of us traveling to Europe or Canada for vacations, the impact is negative for our companies exporting to these countries. The customers abroad must now pay more euros or Canadian dollars to buy American goods. Our products are more costly and cause concerns about reducing export sales.

You may also have read articles criticizing the Chinese for “artificially” keeping their currency exchange rate with the U.S. dollar too low. In effect, the Chinese set the exchange rate for U.S. dollars and don’t allow market values to fluctuate to any large extent. The impact to us is prices of Chinese merchandise are relatively too low, promoting Chinese exports. There have been intense international pressures on the Chinese to raise the value of their currency. They have agreed to do so, but slowly. Is this good or bad news? For our consumers and businesses that buy goods, it is bad news. Prices will rise. For our exporters, it is good news our prices will fall for Chinese purchasers. Given the current trade imbalance with the Chinese, we buy more from them than we sell, the overall impact could be seen as negative.

So how do we answer the question, “What is a dollar worth”? As always, with complex economic issues, the answer is uncertain and subject to multiple factors impacting our economy.

In terms of inflation, the expectation is that a dollar will, in general, be worth about the same in purchasing power in a year as it purchases today. The biggest threat to price increases is a continuation of record government spending and increasing deficits. As some say, “the government can’t spend our way out of a recession.”

In terms of foreign currency rate changes, we will see a mix of imported goods decreasing and increasing in price depending on the country of origin. We can expect the cost of traveling to Europe and Canada to remain relatively low for the next year.

Overall, in a year from now the dollar will be worth about what it is today. Enjoy a window of opportunity to travel to some countries at a time when the “dollar is worth more.”

David Mielke is dean of Eastern Michigan University’s College of Business and a leader of SPARK East, a startup business incubator in downtown Ypsilanti. He can be reached at dmielke@emich.edu.