ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Inflation does not always imply falling purchasing power of one’s money income since it may rise faster than the price level. A higher real income means a higher purchasing power since real income refers to the income adjusted for inflation.

Detailed explanation-2: -In an inflationary environment, unevenly rising prices inevitably reduce the purchasing power of some consumers, and this erosion of real income is the single biggest cost of inflation. Inflation can also distort purchasing power over time for recipients and payers of fixed interest rates.

Detailed explanation-3: -Deflation Definition Deflation is when consumer and asset prices decrease over time, and purchasing power increases. Essentially, you can buy more goods or services tomorrow with the same amount of money you have today. This is the mirror image of inflation, which is the gradual increase in prices across the economy.

Detailed explanation-4: -Disproportionately Impacts Low-Income Households. Raises Cost Of Living. Raises Interest Rates. Hurts The Growth Of Stocks And Bonds.