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.
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.