Question

How would an increase in inflation help or hurt you? in detail Thank You

Answer 1

Inflation refers to a sustained increase in the general price level. Therefore, inflation results in a fall in the purchasing power of money. For example, the purchasing power of $1 today would be higher than the purchasing power of $1 after 1 year due to inflation. So, we can infer that the real value of a fixed amount of wealth or income of an individual loses its purchasing power by certain extent due to inflation. So, we can buy less amount of goods and services with a give income. Also, since expenses rise due to inflation, savings also falls. Moreover, the real interest earned on one's savings also falls due to inflation as real interest = nominal interest - inflation.