ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -As a result, increased money supply leads to a fall in the value of money and its purchasing power. Thus, ultimately, sustained high inflation will reduce the value of your money and how much it can buy.

Detailed explanation-2: -Rising inflation affects purchasing power by decreasing the number of goods or services you can purchase with your money. Investors must look for ways to make a return higher than the current rate of inflation.

Detailed explanation-3: -Deflation occurs when the overall level of prices in an economy declines and the purchasing power of currency increases. It can be driven by growth in productivity and the abundance of goods and services, by a decrease in aggregate demand, or by a decline in the supply of money and credit.

Detailed explanation-4: -The purchasing power of currency is the quantity of goods and services that can be bought with a monetary unit. Because of rising prices, the purchasing power of currency deteriorates over time. Outside of the country, it drops in cases of depreciation and devaluation and increases with the opposite.

Detailed explanation-5: -Deflation is a general decline in prices for goods and services, typically associated with a contraction in the supply of money and credit in the economy. During deflation, the purchasing power of currency rises over time.