ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Due to Higher Inflation, Consumers Will Trade Down to Own-Label Goods. Cash-strapped consumers are also trading down to own-or private-label goods-products sold under a retailer’s name, typically at a lower price than their branded counterparts-as a consequence of inflation.

Detailed explanation-2: -If the inflation rate is 1% (lower inflation), the purchasing power of money will be 1% less a year later. If the inflation rate is 5% (higher inflation), the purchasing power of money will be 5% less a year later.

Detailed explanation-3: -Any time your savings don’t grow at the same rate as inflation, you will effectively lose money. If you are a retired adult living on your savings, you can’t keep up the same standard of living if inflation cuts into your purchasing power with every passing year.

Detailed explanation-4: -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.