ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -For investors, it is important that the returns on their investments are at least the same rate as inflation; if they are less, then their investments are losing money even if it shows gains.

Detailed explanation-2: -The best time to buy silver or gold is when the currency is losing value during times of inflation. When the dollar weakens, commodities become more expensive (more on that later). Historically, silver has performed better than gold during inflation.

Detailed explanation-3: -High inflation has historically correlated with lower returns on equities. Value stocks tends to perform better than growth stocks in high inflation periods, and growth stocks tend to perform better during low inflation.

Detailed explanation-4: -Inflation affects all aspects of the economy, from consumer spending, business investment and employment rates to government programs, tax policies, and interest rates. Understanding inflation is crucial to investing because inflation can reduce the value of investment returns.

Detailed explanation-5: -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.