Inflation is defined as the reduction in the value of currency Inflation erodes the value of money and financial assets. The value of money depends on what it will buy. As prices go up, the purchasing power of money declines. The value of your bank balance also decreases since with higher prices, it takes more money to purchase the same quantity of goods and services. If I say that money is being stolen from your wallet right now. How will you feel? If you keep Rs. 1 lakh in your locker right now and you open the locker straight after 10 years, then you won’t have 1 lakh rupees! You’ll only have sixty thousand! But who stole this money? The answer is INFLATION. A consumer has to make some spends to live his/her life, for e.g.: food, housing, clothes, transport, electronics, medical costs, education, etc. If the process of these essential items increases, more expenditure will be there every year. If you spend Rs. 10000 a month, in 2021 for your needs and in 2022, you need Rs. 10500 to buy same things, every month, so the Rs. 500 or 5% is the yearly inflation rate. If someone understands the concept of inflation best from your home is your domestic help who has already decided before she takes your work that her salary will increase, every year, by 10% or more. Inflation steals your money by making your currency hold less value. Economists justify this as part of their role as overseers of the economy – to keep the money flowing. The modern monetary theory argues that governments should be allowed to print as much money as they need to remain solvent. Belief in this concept is not widely held, but the notion of printing as much money as needed always makes its way on the table in a crisis, and the corona virus pandemic is no exception.
In economic terms ,inflation means a general increase in prices & fall in the purchasing value of money. The prices keeps on rising every year & every day this leads to decrease in the purchasing power or money. It is caused due to excess of money supply. The cost of living increases because the prices of all goods & services increases and as the currency value drops we have to spend more to buy the same amount of goods & services. This causes unemployment to increase , the poor and middle class are the one's who suffer more during inflation.
Inflation is one of the most frequently used terms in economic discussions, yet the concept is variously misconstrued. There are various schools of thought on inflation, but there is a consensus among economists that inflation is a continuous rise in the prices.
By Simply putting , inflation depicts an economic situation where there is a general rise in the prices of goods and services, continuously. It could be defined as ‘a continuing rise in prices as measured by an index such as the consumer price index (CPI) or by the implicit price deflator for Gross National Product (GNP)’. Inflation isfrequently described as a state where “too much money is chasing too few goods”. When there is inflation, the currency loses purchasing power. The purchasing power of a given amount of rupee will be smaller over time when there is inflation in the economy. For example, assuming that Rs.1000 can purchase 10 shirts in the current period, if the price of shirts double in the next period, the same Rs2000 can only afford 5 shirts. Inflation affects different people or economic agents differently. Broadly, there are two economic groups in every society, the fixed income group and the flexible income group.
During inflation, those in the first group lose while those in the second group gain. The reason is that the price movement of different goods and services are not uniform. During inflation, most prices rise, but the rate of increase of individual prices differ. Prices of some goods and services rise faster than others while some may even remain unchanged. The poor and the middle classes suffer because their wages and salaries are more or less fixed but the prices of commodities continue to rise. On the other hand, the businessmen, industrialists, traders, real estate holders, speculators and others with variable incomes gain during rising prices. The latter category of persons becomes rich atthe cost of the former group. There is transfer of income and wealth from the poor to the rich.
Generally, which income group of the society gains or loses from inflation depends on who anticipates inflation and who does not. Those who correctlyanticipate inflation can adjust their presentearnings, buying, borrowing and lending activities against the loss of income and wealth as a result of inflation.
From milk to petrol to groceries to education and healthcare costs and just about everything we use in our daily lives, the prices keep rising year-on-year and we end up paying more without giving much thought to it. This general increase in prices is called inflation which reduces the value of your money over time. Most people underestimate the power of inflation and its damaging effect on their wealth. It increases the cost of living and reduces the spending power. Inflation, just like interest, adds on top of last year's numbers - this means that the effect is just like that of compound interest but in a negative manner.The problem with inflation is that it's invisible, but its effect is very real.... People usually think about investing in nominal terms, they never include inflation in their calculations and it never occurs to them that it shrinks the amount of wealth they think they would make with their investments over the years. Look at the illustration below which demonstrates how your target corpus amount might be higher than what you think. It is high time you stop falling victim to inflation. The only way to beat inflation at its own game is to earn good returns and equity is the only asset class that beats inflation hands down in the long-term.
There two main topics concerning this question. That are INFLATION and DEFLATION. In Inflation goods and services are worth more than average i.e. its expensive whereas in Deflation it is exactly opposite where your money is worth more than the goods and services i.e. everything is cheap. as we all know that this is the inflationary system where the money is devalued and goods and service's value increases overtime. For example: If I used to carry a 10 rupee Note in my lunch box 20 years ago then i would have a complete meal with my stomach full and i would save 2 rupees too. But if the same scenario happens in this year then i wouldn't even be able to afford a piece of bread in 10 rupees. The point is purchasing power of the money is decreasing day by day. That is why Inflation is stealing your money.
"Time and Tide waits for none" - With the time which keeps going, economies growing and ever-changing international situations. The Socio-economic conditions and overall development of any economy gets affected. It may lead to multiple types changes in various economic factors as per situation ; which includes Inflation which is nothing but increase in general price level of a commodity in a market due to various factors over a period of time. It also leads to decreasing value of money. Inflation affects the demand of commodities on a larger extent. Let's say we have an commodity X whose price once was 10 units but now it's price has rised by 5 % due to inflation - the same commodity will be much more expensive and unaffordable for various buyers and it affects demand, buying capacities and employment in general but over period of time if inflation keeps on increasing (which in a way is completely true or happens) it will affect value of money. The same 10 units in which one was able to buy X commodity after 5 years the same value of money and commodity maybe the same but price doesn't remain the same. Thus, over a period of time level of value of that money has reduced - Where did that go? - In a way that was eroded or eaten up by rosen prices viz. Inflation assuming no change in income of buyers.
It is clearly visible through following: Cost of living 5 years ago and today isn't the same.
While if we don't just store up this money in our houses and instead keep them in our banks - It will in a way still not be enough because of varying percentage of interest and it's gap with the rise of inflation in percentage.
So, Inflation holds the power to affect and which leads to decreasing value of stored money or currency.
Inflation means a general increase price level and fall in the purchasing value of money. Inflation can be contrasted with deflation, which will the vice versa of inflation that is the prices declines and purchasing Power increases. Inflation can be positive or negative as well first we need to understand it properly and then try to work on it. Today from milk to petrol and to groceries and whatever we use in daily lives, we have kept rising (prices) year on year and all we end up paying whether the product is useful in future or not. The general increase is know as inflation as I have mentioned earlier. Many people underestimate the term inflation and ignore it and then that can affect or have affected the wealth. Eg- i) It has increased the cost of living and have lessen the spending power.
ii) Expenses- The schoolfees/ month- In 2002 it was Rs 2000, in 2022 it is Rs 9000, and in future the cost will be Rs 19700. Same about higher educations the prices in 2002 it was 3to4 lakhs,in 2022 it is 10to15 lakhs and in future the cost will be 16to20lakhs. Then same goes with doctor consult per visit the price will be increasing year by year but the use or effect of medicine (the value) will be decreased. And same about petrol nowadays the rate of petrol is high. If we try to ignore or neglect this things then it might hurt or crash your wealth. Thank you!
Inflation is the rate of increase in prices over a given period of time.Inflation increases the price of goods and services over time, effectively decreasing the number of goods and services you can buy with a dollar in the future as opposed to a dollar today. If wages remain the same but inflation causes the prices of goods and services to increase over time, it will take a larger percentage of your income to purchase the same good or service in the future.For example , if a pen costs $1 today, it's possible that it could cost $2 for the same apple one year from today. This effectively decreases the purchasing power of money over that period, since it will cost twice as much to purchase the same product in the future. Hence, inflation erodes your money and therefore your wealth.
Inflation is a sustained, generalized increase in the prices of goods and services. Inflation erodes the value of money and financial assets. The value of money depends on what it will buy. As prices go up, the purchasing power of money declines. The value of your bank balance also decreases since with higher prices, it takes more money to purchase the same quantity of goods and services.
For example: The 100 rupees note that you are holding today could buy you approx. 2L of fuel in 2010 when the fuel prices were between Rs30-40/Litre, but the same 100 rupees note could buy you hardly 1L of fuel today as the prices have surged to as high as Rs95-110/Litre.
Similarly, there is huge increase in food prices over the year especially for certain staples such as pulses, milk, fruits, and vegetables.
It simply means that now you have to spend more to acquire that same quantity of goods/service which you could manage to buy at lower prices in the past. This is how Inflation steals your money by making your currency hold less value.
Increase in price is called in inflation which reduces the value of your money over time
The power of inflation and it's damaging effect on their wealth and it's increases the cost of living and reduce the spending power
For example:the cost of living increased from the INR 15 per in the year 2002 the INR 48 per litre the price of today
Example: you kept aside Rs 5 lakh in your savings account at beginning of 2012 and earned an average interest of 5 per cent in these 10 years Now mathematically you might think you would end up with Rs 8 lakh today it is not so
Inflation cannot be avoided we can make sure to beat it only by earning more than it
What inflation actually mean? Inflation simply means reduction in the value of money. In past few years prices are rising but what about income? If income doesn't increase the way prices of commodities are increasing the entire country may suffer. For instance a plate of Vada pav and a Cup of tea cost 25Rs but suddenly the price rises to 35Rs . This snack is a daily routine for a rickshaw driver,but if rickshaw fare stays constant that's 21Rs will he be able to have his daily snack? In these situations a common man decides to save the money,but the bank interest rate is 3-3.5% but the prices of commodities are increasing with the rate of 6-7% so the saved money can't be considered as wealth. So this is how inflation is eating your wealth.
Basically, No, Inflation do not steal your money, literally. But, Yes, it steals value from your money.
"Inflation is when your money worth less over time."
•Inflation is the hot topic everyone is talking about right now.
•Inflation steals your money by making your currency hold less value.
•Simply it means, the money is devalued, with goods and services going up over time.
Let us understand it using few examples:
•Example 1: A litre of toned milk used to cost ₹25 in the year 2010. Now the same litre of toned milk costs ₹45 in 2020. The milk has become costlier. With the same ₹25, one can get only half a litre of milk in 2020. This is called the falling purchasing power of the currency.
•Example 2: If ₹5000 kept under your bed today is worth more than it is tomorrow. This will not steal your money but the purchasing power of the same ₹5,000 10 years later is less.
This is how inflation steals value from your money/wealth.
From buying a chocolate worth 10 rupees to paying 20 rupees for the same, from buying a bag full of groceries worth 200 rupees to barely getting 4 items for the same amount, inflation has caused a price rise in our daily lives. Inflation is defined as the general price increase and reduction in the purchasing power of money. As prices go up, it indirectly means that your value of money has gone down. Suppose a common man saves x amount of his salary for the future, because of inflation he'll now have to reduce his savings in order to afford his daily expenses. This situation is nothing but stealing money out of a man's "pocket".
Assuming a man has saved money in his bank account, the real returns of him will reduce a lot due to inflation eating up a decent chunk of his nominal return, thus leaving him with much less returns than expected. The entire world we know today is based on an inflationary system. Meaning, the money is devalued, with the prices of goods and services going up over time. Inflation is also a major reason as to why the rich get richer and the poor get poorer. Increasing debts and increasing returns is the result of this monetary system that we live in may perpetuate itself until it loses morality, political radicalisation, or central bank’s absolute control. Whichever the way, it will be painful.
Inflation, or a general increase in the rise of prices, initially adversely affects one's consumption expenditure, as there is no corresponding increase in his or her income.
However, as the income increases, consumer behaviour changes, which prompts him or her to increase his consumption expenditure. But subsequently, it is not sustainable, as it adversely affects the consumer's utility, within his or her budget constraints.
Macroeconomically, as prices increase, imported goods become costlier, which in a way leads to the depreciation of the currency. So if you are an enterprise that imports machinery, your cost of production will increase, and if you are a start-up, it will further drain your wealth, which will reduce your bargaining power in the market.
Hence, a way to control it would be to adopt a tighter monetary policy, which our country has seen in light of the recent Russia-Ukraine conflict
From food to education and healthcare costs and just about everything we use in our daily lives, the prices keep rising year-on-year and we end up paying more .inflation is an important measure of the state of the economy. Inflation is a sustained, generalized increase in the prices of goods and services.
Inflation can be so high that it causes significant problems in the working of the economy.
Inflation is a decline in the purchasing power of a given currency as the cost of living goes up.
If the process of these essential items increases, more expenditure will be there every year.
For example, If you invested Rs.1 lakh in gold 10 years ago, your investment would be now worth Rs.1.72 lakh. But there’s nothing to smile about because the 5.78% annual consumer inflation in the past 10 years has reduced its value to just Rs.94,192. So while gold prices rose 5.6% annually since 2012, you actually lost money by investing in the metal.Inflation steals your money by making your currency hold less value.
Wealth is the value of all the assets of worth owned by a person or an entity. Wealth can also be accumulation of scarce resources. These resources can be measured in terms of money value. To measure wealth,one can find the net worth of wealth. It is determined by taking the total market value of all assets owned and subtracting all the debts/liabilities from them. The net worth is measured in terms of money and the extent to which outside forces can manipulate the value of money which can have a dramatic impact on measuring wealth. By outside forces,one can think of inflation. Inflation is the rise in the price, which by default means declining of purchasing power over time. There are many factors that affect the inflation,one of the factor is the value of currency. As we all know the value of rupee is decreasing with respect to the U.S dollar, the inflation rate have increased in India. Now to answer the question of how inflation is stealing our wealth, An individual need a big and diversified set of products as well as a host of services for living a comfortable life. They include commodities like food grains,metal,fuel and utilities like electricity and transport and services like labor and healthcare. Price rise, which means one unit of money buys fewer goods and services. Now an individual uses his wealth (money)to live a comfortable life and buying of such assets is not a economically good experience as it requires shelling out more money , and this is how inflation steals our wealth.
A middle class Indian always neglects inflation while saving. It is common for many Indians to save their money in banks without realizing how inflation will eat up all their gains. For instance, if a person keeps aside 2 lakhs in his savings account, with constant amount of addition to it; He might think that he would end up with more amount of money in 'x' years. But that is not the reality. Because he neglected the inflation rate, the money he thought he might have, its purchasing power becomes less while the cost of all the good and services which he enjoys to maintain his lifestyle increases. And thus he is unable to buy the same goods and services with the available saving he has as the value of money reduces. This is how people hardly earn any returns let alone generate wealth.
Ever wonder how your grandparents bought a house with money barely enough to buy a car today? The prices for goods are constantly increasing, and the main reason for this is inflation. Inflation is the general increases in prices of services and commodities, and a fall in the purchasing power of money. Contrary to popular belief, inflation is necessary for the economy to be well functioning, productive and growing, however, this is true only till a certain extent, as after a particular point, it is harmful to the economy. Inflation, when controlled, might be good for the economy in general, but to an average individual, it generates a loss of wealth. As kids, growing up, the most basic advice we would hear is to keep our money in the bank, even cartoons depicted it, but this advice stems from a time when our grandparents were our age, and today, this advice is irrelevant, given how inflation is eating up the purchasing power of the money, and the money will be worth lesser and lesser as the years go by. What this means is, in order to buy a a commodity or a service, for example, lets say a watch, you would have to pay more in the future for the same watch, than what you would have to pay today. The watch is the same watch, the only difference is that the money used to buy it is worth less in the future. Sounds scary right? Now imagine this happening for every service and product that you buy, the costs add up, and you soon realise that you would have to earn more money to sustain the same lifestyle you lead at the present, now this is odd since with more money you should have been able to buy more, and this is exactly how inflation steals your wealth.
In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.for example you are enjoying your 50Rs. Coffee from your favourite spot for the past 2 years,and one day you present your 50rs notes to buy the coffee only to find out that they have raised the price of the coffee by 20rs that means that 50rs note no longer has the purchasing power.If your income is not increasing atleast the rate of inflation then you are making less money overtime.Also if the money that we allow the banks to hold and make money off doesn't give us atleast the amount of interest to match inflation that's how you lose your money.In short is same money buying lesser stuff in future.Inflation is a decline in the purchasing power of a given currency as the cost of living goes up.The purchasing power of my money is going down.The value or the things it can buy reduces for me.If you spend Rs. 10000 a month, in 2021 for your needs and in 2022, you need Rs. 10500 to buy same things, every month, so the Rs. 500 or 5% is the yearly inflation rate.At present, the rate of inflation in India is 7%.
The problem with inflation is that it's invisible, but its effect is very real and you cannot escape it. So even if the Rs.10 looks the same after 10 years.
Inflation is the general increase in the price (fall in the value of money)
This also impacts the cost of living in a country. When inflation is high, the cost of living gets higher as well, which ultimately leads to a deceleration in economic growth.
Inflation affects different people differently. This is because of the fall in the value of money. When price rises or the value of money falls, some groups of the society gain, some lose and some stand in-between. businessmen, industrialists, traders, real estate holders, and others with variable incomes gain during rising prices. On the other hand, the poor and middle classes suffer because their wages and salaries are more or less fixed but the prices of commodities continue to rise. They become more impoverished. Mainly the middle class with a large fixed-rate mortgage, wages that increase with inflation and inflation-adjusted pensions) and hurts those with net nominal assets (such as a retired couple living off income from bonds and CDs). the rich have the ability to shift assets to inflation-protected forms.
Salaried workers such as clerks, teachers, and other white-collar persons lose due to their salaries are slow to adjust when prices are rising. The recipients of transfer payments such as pensions, unemployment insurance, social security, get fixed payments. All such persons lose because they receive fixed payments, while the value of money continues to fall with rising prices.
Inflation is defined as the reduction in the value of currency Inflation erodes the value of money and financial assets. The value of money depends on what it will buy. As prices go up, the purchasing power of money declines. The value of your bank balance also decreases since with higher prices, it takes more money to purchase the same quantity of goods and services. If I say that money is being stolen from your wallet right now. How will you feel? If you keep Rs. 1 lakh in your locker right now and you open the locker straight after 10 years, then you won’t have 1 lakh rupees! You’ll only have sixty thousand! But who stole this money? The answer is INFLATION. A consumer has to make some spends to live his/her life, for e.g.: food, housing, clothes, transport, electronics, medical costs, education, etc. If the process of these essential items increases, more expenditure will be there every year. If you spend Rs. 10000 a month, in 2021 for your needs and in 2022, you need Rs. 10500 to buy same things, every month, so the Rs. 500 or 5% is the yearly inflation rate. If someone understands the concept of inflation best from your home is your domestic help who has already decided before she takes your work that her salary will increase, every year, by 10% or more. Inflation steals your money by making your currency hold less value. Economists justify this as part of their role as overseers of the economy – to keep the money flowing. The modern monetary theory argues that governments should be allowed to print as much money as they need to remain solvent. Belief in this concept is not widely held, but the notion of printing as much money as needed always makes its way on the table in a crisis, and the corona virus pandemic is no exception.
In economic terms ,inflation means a general increase in prices & fall in the purchasing value of money. The prices keeps on rising every year & every day this leads to decrease in the purchasing power or money. It is caused due to excess of money supply. The cost of living increases because the prices of all goods & services increases and as the currency value drops we have to spend more to buy the same amount of goods & services. This causes unemployment to increase , the poor and middle class are the one's who suffer more during inflation.
Inflation is one of the most frequently used terms in economic discussions, yet the concept is variously misconstrued. There are various schools of thought on inflation, but there is a consensus among economists that inflation is a continuous rise in the prices. By Simply putting , inflation depicts an economic situation where there is a general rise in the prices of goods and services, continuously. It could be defined as ‘a continuing rise in prices as measured by an index such as the consumer price index (CPI) or by the implicit price deflator for Gross National Product (GNP)’. Inflation is frequently described as a state where “too much money is chasing too few goods”. When there is inflation, the currency loses purchasing power. The purchasing power of a given amount of rupee will be smaller over time when there is inflation in the economy. For example, assuming that Rs.1000 can purchase 10 shirts in the current period, if the price of shirts double in the next period, the same Rs2000 can only afford 5 shirts. Inflation affects different people or economic agents differently. Broadly, there are two economic groups in every society, the fixed income group and the flexible income group. During inflation, those in the first group lose while those in the second group gain. The reason is that the price movement of different goods and services are not uniform. During inflation, most prices rise, but the rate of increase of individual prices differ. Prices of some goods and services rise faster than others while some may even remain unchanged. The poor and the middle classes suffer because their wages and salaries are more or less fixed but the prices of commodities continue to rise. On the other hand, the businessmen, industrialists, traders, real estate holders, speculators and others with variable incomes gain during rising prices. The latter category of persons becomes rich at the cost of the former group. There is transfer of income and wealth from the poor to the rich. Generally, which income group of the society gains or loses from inflation depends on who anticipates inflation and who does not. Those who correctly anticipate inflation can adjust their present earnings, buying, borrowing and lending activities against the loss of income and wealth as a result of inflation.
From milk to petrol to groceries to education and healthcare costs and just about everything we use in our daily lives, the prices keep rising year-on-year and we end up paying more without giving much thought to it. This general increase in prices is called inflation which reduces the value of your money over time. Most people underestimate the power of inflation and its damaging effect on their wealth. It increases the cost of living and reduces the spending power. Inflation, just like interest, adds on top of last year's numbers - this means that the effect is just like that of compound interest but in a negative manner.The problem with inflation is that it's invisible, but its effect is very real.... People usually think about investing in nominal terms, they never include inflation in their calculations and it never occurs to them that it shrinks the amount of wealth they think they would make with their investments over the years. Look at the illustration below which demonstrates how your target corpus amount might be higher than what you think. It is high time you stop falling victim to inflation. The only way to beat inflation at its own game is to earn good returns and equity is the only asset class that beats inflation hands down in the long-term.
NAME- ARYAN SANGHVI
STD- SYBA
DIV- A
ROLL NO -57
ID CARD NO -1220210721
There two main topics concerning this question. That are INFLATION and DEFLATION. In Inflation goods and services are worth more than average i.e. its expensive whereas in Deflation it is exactly opposite where your money is worth more than the goods and services i.e. everything is cheap. as we all know that this is the inflationary system where the money is devalued and goods and service's value increases overtime. For example: If I used to carry a 10 rupee Note in my lunch box 20 years ago then i would have a complete meal with my stomach full and i would save 2 rupees too. But if the same scenario happens in this year then i wouldn't even be able to afford a piece of bread in 10 rupees. The point is purchasing power of the money is decreasing day by day. That is why Inflation is stealing your money.
THANK YOU.
Veer Gada
Roll No.51
SYBA
"Time and Tide waits for none" - With the time which keeps going, economies growing and ever-changing international situations. The Socio-economic conditions and overall development of any economy gets affected. It may lead to multiple types changes in various economic factors as per situation ; which includes Inflation which is nothing but increase in general price level of a commodity in a market due to various factors over a period of time. It also leads to decreasing value of money. Inflation affects the demand of commodities on a larger extent. Let's say we have an commodity X whose price once was 10 units but now it's price has rised by 5 % due to inflation - the same commodity will be much more expensive and unaffordable for various buyers and it affects demand, buying capacities and employment in general but over period of time if inflation keeps on increasing (which in a way is completely true or happens) it will affect value of money. The same 10 units in which one was able to buy X commodity after 5 years the same value of money and commodity maybe the same but price doesn't remain the same. Thus, over a period of time level of value of that money has reduced - Where did that go? - In a way that was eroded or eaten up by rosen prices viz. Inflation assuming no change in income of buyers.
It is clearly visible through following: Cost of living 5 years ago and today isn't the same.
While if we don't just store up this money in our houses and instead keep them in our banks - It will in a way still not be enough because of varying percentage of interest and it's gap with the rise of inflation in percentage.
So, Inflation holds the power to affect and which leads to decreasing value of stored money or currency.
Thank you!
Inflation means a general increase price level and fall in the purchasing value of money. Inflation can be contrasted with deflation, which will the vice versa of inflation that is the prices declines and purchasing Power increases. Inflation can be positive or negative as well first we need to understand it properly and then try to work on it. Today from milk to petrol and to groceries and whatever we use in daily lives, we have kept rising (prices) year on year and all we end up paying whether the product is useful in future or not. The general increase is know as inflation as I have mentioned earlier. Many people underestimate the term inflation and ignore it and then that can affect or have affected the wealth. Eg- i) It has increased the cost of living and have lessen the spending power.
ii) Expenses- The schoolfees/ month- In 2002 it was Rs 2000, in 2022 it is Rs 9000, and in future the cost will be Rs 19700. Same about higher educations the prices in 2002 it was 3to4 lakhs,in 2022 it is 10to15 lakhs and in future the cost will be 16to20lakhs. Then same goes with doctor consult per visit the price will be increasing year by year but the use or effect of medicine (the value) will be decreased. And same about petrol nowadays the rate of petrol is high. If we try to ignore or neglect this things then it might hurt or crash your wealth. Thank you!
Inflation is the rate of increase in prices over a given period of time. Inflation increases the price of goods and services over time, effectively decreasing the number of goods and services you can buy with a dollar in the future as opposed to a dollar today. If wages remain the same but inflation causes the prices of goods and services to increase over time, it will take a larger percentage of your income to purchase the same good or service in the future. For example , if a pen costs $1 today, it's possible that it could cost $2 for the same apple one year from today. This effectively decreases the purchasing power of money over that period, since it will cost twice as much to purchase the same product in the future. Hence, inflation erodes your money and therefore your wealth.
Inflation is a sustained, generalized increase in the prices of goods and services. Inflation erodes the value of money and financial assets. The value of money depends on what it will buy. As prices go up, the purchasing power of money declines. The value of your bank balance also decreases since with higher prices, it takes more money to purchase the same quantity of goods and services.
For example: The 100 rupees note that you are holding today could buy you approx. 2L of fuel in 2010 when the fuel prices were between Rs30-40/Litre, but the same 100 rupees note could buy you hardly 1L of fuel today as the prices have surged to as high as Rs95-110/Litre.
Similarly, there is huge increase in food prices over the year especially for certain staples such as pulses, milk, fruits, and vegetables.
It simply means that now you have to spend more to acquire that same quantity of goods/service which you could manage to buy at lower prices in the past. This is how Inflation steals your money by making your currency hold less value.
Increase in price is called in inflation which reduces the value of your money over time
The power of inflation and it's damaging effect on their wealth and it's increases the cost of living and reduce the spending power
For example:the cost of living increased from the INR 15 per in the year 2002 the INR 48 per litre the price of today
Example: you kept aside Rs 5 lakh in your savings account at beginning of 2012 and earned an average interest of 5 per cent in these 10 years Now mathematically you might think you would end up with Rs 8 lakh today it is not so
Inflation cannot be avoided we can make sure to beat it only by earning more than it
What inflation actually mean? Inflation simply means reduction in the value of money. In past few years prices are rising but what about income? If income doesn't increase the way prices of commodities are increasing the entire country may suffer. For instance a plate of Vada pav and a Cup of tea cost 25Rs but suddenly the price rises to 35Rs . This snack is a daily routine for a rickshaw driver,but if rickshaw fare stays constant that's 21Rs will he be able to have his daily snack? In these situations a common man decides to save the money,but the bank interest rate is 3-3.5% but the prices of commodities are increasing with the rate of 6-7% so the saved money can't be considered as wealth. So this is how inflation is eating your wealth.
Basically, No, Inflation do not steal your money, literally. But, Yes, it steals value from your money.
"Inflation is when your money worth less over time."
•Inflation is the hot topic everyone is talking about right now.
•Inflation steals your money by making your currency hold less value.
•Simply it means, the money is devalued, with goods and services going up over time.
Let us understand it using few examples:
•Example 1: A litre of toned milk used to cost ₹25 in the year 2010. Now the same litre of toned milk costs ₹45 in 2020. The milk has become costlier. With the same ₹25, one can get only half a litre of milk in 2020. This is called the falling purchasing power of the currency.
•Example 2: If ₹5000 kept under your bed today is worth more than it is tomorrow. This will not steal your money but the purchasing power of the same ₹5,000 10 years later is less.
This is how inflation steals value from your money/wealth.
#Facts:
•COVID and even the Russia-Ukraine war have taken a back seat as people all around the world struggle to adjust to the rising cost of living.
•The entire world we know today is based on an inflationary system.
•Economists justify Inflation as part of their role as overseers of the economy to keep the money flowing.
•The modern monetary theory argues that governments should be allowed to print as much money as they need to remain solvent.
From buying a chocolate worth 10 rupees to paying 20 rupees for the same, from buying a bag full of groceries worth 200 rupees to barely getting 4 items for the same amount, inflation has caused a price rise in our daily lives. Inflation is defined as the general price increase and reduction in the purchasing power of money. As prices go up, it indirectly means that your value of money has gone down. Suppose a common man saves x amount of his salary for the future, because of inflation he'll now have to reduce his savings in order to afford his daily expenses. This situation is nothing but stealing money out of a man's "pocket".
Assuming a man has saved money in his bank account, the real returns of him will reduce a lot due to inflation eating up a decent chunk of his nominal return, thus leaving him with much less returns than expected. The entire world we know today is based on an inflationary system. Meaning, the money is devalued, with the prices of goods and services going up over time. Inflation is also a major reason as to why the rich get richer and the poor get poorer. Increasing debts and increasing returns is the result of this monetary system that we live in may perpetuate itself until it loses morality, political radicalisation, or central bank’s absolute control. Whichever the way, it will be painful.
Chandrima Jati
TYBA Economics
roll no. 14
Inflation, or a general increase in the rise of prices, initially adversely affects one's consumption expenditure, as there is no corresponding increase in his or her income.
However, as the income increases, consumer behaviour changes, which prompts him or her to increase his consumption expenditure. But subsequently, it is not sustainable, as it adversely affects the consumer's utility, within his or her budget constraints.
Macroeconomically, as prices increase, imported goods become costlier, which in a way leads to the depreciation of the currency. So if you are an enterprise that imports machinery, your cost of production will increase, and if you are a start-up, it will further drain your wealth, which will reduce your bargaining power in the market.
Hence, a way to control it would be to adopt a tighter monetary policy, which our country has seen in light of the recent Russia-Ukraine conflict
From food to education and healthcare costs and just about everything we use in our daily lives, the prices keep rising year-on-year and we end up paying more .inflation is an important measure of the state of the economy. Inflation is a sustained, generalized increase in the prices of goods and services.
Inflation can be so high that it causes significant problems in the working of the economy.
Inflation is a decline in the purchasing power of a given currency as the cost of living goes up.
If the process of these essential items increases, more expenditure will be there every year.
For example, If you invested Rs.1 lakh in gold 10 years ago, your investment would be now worth Rs.1.72 lakh. But there’s nothing to smile about because the 5.78% annual consumer inflation in the past 10 years has reduced its value to just Rs.94,192. So while gold prices rose 5.6% annually since 2012, you actually lost money by investing in the metal.Inflation steals your money by making your currency hold less value.
Wealth is the value of all the assets of worth owned by a person or an entity. Wealth can also be accumulation of scarce resources. These resources can be measured in terms of money value. To measure wealth,one can find the net worth of wealth. It is determined by taking the total market value of all assets owned and subtracting all the debts/liabilities from them. The net worth is measured in terms of money and the extent to which outside forces can manipulate the value of money which can have a dramatic impact on measuring wealth. By outside forces,one can think of inflation. Inflation is the rise in the price, which by default means declining of purchasing power over time. There are many factors that affect the inflation,one of the factor is the value of currency. As we all know the value of rupee is decreasing with respect to the U.S dollar, the inflation rate have increased in India. Now to answer the question of how inflation is stealing our wealth, An individual need a big and diversified set of products as well as a host of services for living a comfortable life. They include commodities like food grains,metal,fuel and utilities like electricity and transport and services like labor and healthcare. Price rise, which means one unit of money buys fewer goods and services. Now an individual uses his wealth (money)to live a comfortable life and buying of such assets is not a economically good experience as it requires shelling out more money , and this is how inflation steals our wealth.
A middle class Indian always neglects inflation while saving. It is common for many Indians to save their money in banks without realizing how inflation will eat up all their gains. For instance, if a person keeps aside 2 lakhs in his savings account, with constant amount of addition to it; He might think that he would end up with more amount of money in 'x' years. But that is not the reality. Because he neglected the inflation rate, the money he thought he might have, its purchasing power becomes less while the cost of all the good and services which he enjoys to maintain his lifestyle increases. And thus he is unable to buy the same goods and services with the available saving he has as the value of money reduces. This is how people hardly earn any returns let alone generate wealth.
Ever wonder how your grandparents bought a house with money barely enough to buy a car today? The prices for goods are constantly increasing, and the main reason for this is inflation. Inflation is the general increases in prices of services and commodities, and a fall in the purchasing power of money. Contrary to popular belief, inflation is necessary for the economy to be well functioning, productive and growing, however, this is true only till a certain extent, as after a particular point, it is harmful to the economy. Inflation, when controlled, might be good for the economy in general, but to an average individual, it generates a loss of wealth. As kids, growing up, the most basic advice we would hear is to keep our money in the bank, even cartoons depicted it, but this advice stems from a time when our grandparents were our age, and today, this advice is irrelevant, given how inflation is eating up the purchasing power of the money, and the money will be worth lesser and lesser as the years go by. What this means is, in order to buy a a commodity or a service, for example, lets say a watch, you would have to pay more in the future for the same watch, than what you would have to pay today. The watch is the same watch, the only difference is that the money used to buy it is worth less in the future. Sounds scary right? Now imagine this happening for every service and product that you buy, the costs add up, and you soon realise that you would have to earn more money to sustain the same lifestyle you lead at the present, now this is odd since with more money you should have been able to buy more, and this is exactly how inflation steals your wealth.
In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. for example you are enjoying your 50Rs. Coffee from your favourite spot for the past 2 years,and one day you present your 50rs notes to buy the coffee only to find out that they have raised the price of the coffee by 20rs that means that 50rs note no longer has the purchasing power. If your income is not increasing atleast the rate of inflation then you are making less money overtime.Also if the money that we allow the banks to hold and make money off doesn't give us atleast the amount of interest to match inflation that's how you lose your money. In short is same money buying lesser stuff in future.Inflation is a decline in the purchasing power of a given currency as the cost of living goes up.The purchasing power of my money is going down. The value or the things it can buy reduces for me.If you spend Rs. 10000 a month, in 2021 for your needs and in 2022, you need Rs. 10500 to buy same things, every month, so the Rs. 500 or 5% is the yearly inflation rate.At present, the rate of inflation in India is 7%.
The problem with inflation is that it's invisible, but its effect is very real and you cannot escape it. So even if the Rs.10 looks the same after 10 years.
Inflation is the general increase in the price (fall in the value of money)
This also impacts the cost of living in a country. When inflation is high, the cost of living gets higher as well, which ultimately leads to a deceleration in economic growth.
Inflation affects different people differently. This is because of the fall in the value of money. When price rises or the value of money falls, some groups of the society gain, some lose and some stand in-between. businessmen, industrialists, traders, real estate holders, and others with variable incomes gain during rising prices. On the other hand, the poor and middle classes suffer because their wages and salaries are more or less fixed but the prices of commodities continue to rise. They become more impoverished. Mainly the middle class with a large fixed-rate mortgage, wages that increase with inflation and inflation-adjusted pensions) and hurts those with net nominal assets (such as a retired couple living off income from bonds and CDs). the rich have the ability to shift assets to inflation-protected forms.
Salaried workers such as clerks, teachers, and other white-collar persons lose due to their salaries are slow to adjust when prices are rising. The recipients of transfer payments such as pensions, unemployment insurance, social security, get fixed payments. All such persons lose because they receive fixed payments, while the value of money continues to fall with rising prices.