Question

what would happen to the buying power of your investment after one year if your rate of return was 8% and the rate of inflation was 3%?

Answer 1

So, let's see: if you invested 100 dollars into something, then with a return of 8%, you would have 108 dollars after a year.

An inflation of 103 % means that those 100 dollars are now equivalent to 103 - but you have more than this, 108 dollars! so You have more money and your purchasing power increased.