Inflation reduces the value of money: As prices rise due to inflation, the value of each unit of currency decreases. This means that people can buy fewer goods and services with the same amount of money.
Inflation affects people differently: Inflation can have a disproportionate effect on people with fixed incomes, such as retirees or those on a fixed salary. These individuals may struggle to keep up with rising prices, leading to a decrease in their standard of living.
Inflation can lead to higher interest rates: In order to combat inflation, central banks may raise interest rates, making it more expensive for people to borrow money.
Inflation can erode savings: Inflation reduces the purchasing power of savings over time. This means that if you save money in an account that earns a lower interest rate than the rate of inflation, the real value of your savings will decrease.
Inflation can be viewed as a form of taxation: When prices rise due to inflation, people effectively pay more for the same goods and services. This is similar to a tax, where people are required to pay more money to the government.
