Inflation affects your standard of living because it can reduce your spending power.
Retirees are often greatly affected by inflation because many retirees live on a fixed income.
You avoid the ravages of inflation if your income level rises at a pace that exceeds the rate of inflation.
Does inflation increase the cost of living?
Inflation occurs when you have an increase in prices for goods and services. Prices for items you need may rise at a slow rate so it is hardly noticeable. At other times, dramatic increases known as hyperinflation can raise prices to significantly high levels that create noticeable changes in your cost of living.
What are the effects of inflation?
When prices rise for energy, food, commodities, and other goods and services, the entire economy is affected. Rising prices, known as inflation, impact the cost of living, the cost of doing business, borrowing money, mortgages, corporate and government bond yields, and every other facet of the economy.
How does inflation affect people with fixed incomes?
Inflation has the potential to significantly reduce the return on fixed-income investments, and investors should monitor its effect on their assets. For example, a bond’s nominal interest rate does not take inflation into account, and an investor will only earn that amount in accumulated value when inflation is zero.
How does inflation affect production?
Cost push inflation occurs when the prices of factors of production like wages, raw materials, fuel and power increase. This makes cost of production expensive which in turn affects the supply. The supply reduces and the prices go up. So, inflation in it’s true essence is increase in prices.