Role of Inflation on Cost of Living

Inflation only occurs when there is an increase in the prices of goods and services. The rise in prices must not have high efficiency, and the inflation will not be noticeable as there will be no much difference. The significant high price hike leading to hyperinflation will have an effect on the cost of living.  Noticeable changes are witnessed in the cost of living.  This will result in unemployment and the rise in prices will have an effect on the economy.  All these factors will have an influence on the standard of living.  The cost of living and inflation go hand in hand, and this can be deciphered through /.

Purchasing power:  Inflation reduces the purchasing power of the people. The product which has been bought for 10 dollars cannot be afforded with the same price after ten years. The reason is inflation. The inflation will exist for longer durations and gradual increase every year will have a major effect. The income has to be increased with the same percentage. For instance, when the inflation increases by 6% and the increase in the income are 3% will never allow the users to buy the products as inflation has increased by six times. Even one percent decrease will not help. More amount on the income earned has to be spent as they have not earned enough to cope up with the inflation.  The lifestyle of the people gets affected by the existing of inflation for a longer time. Inflation will also have an effect on investment as well.

Inflation factors: inflation is described as an increase in prices. There are also other factors in inflation.  Apart from rising in prices, living costs are also considered as inflation.  Rising prices in fixed income securities, growth in debt, long and short term income securities, living costs and interests when compared with income are also considered as inflation.

Inflation due to goods and services: There are certain goods which are not included in the Consumer Price index which have affected due to inflation.  These products have a change in inflation which has effects over the years.  The change in the products will be seen in the long run due to inflation.  The Consumer Price index may show less inflation on the consumer’s goods, and people may experience more inflation than the neighbors.  This will increase as the prices of the items bought by the people may rise due to certain reasons which can have effect on the cost and the standard of living.  All the products will not experience the same rate of inflation.  During a certain period the gas, coffee, energy and cotton prices rise high when compared to the Consumer Price index.

Inflation has adverse effects on the cost of living. When the prices increase the income of the people must also increase or else there will be an impact on the cost of living.  Increase in the percentage of inflation must increase the income at the same percentage or else people will not have the capability to buy the products with the income earned. Thus inflation will have a huge impact on the cost of living in the long run. The inflation measures will be noticeable when the hike is very high.