ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Inflation is a decline in the purchasing power of money over time, and failure to anticipate a change in inflation presents a risk that the realized return on an investment or the future value of an asset will be less than the expected value.

Detailed explanation-2: -As inflation rises, every rupee will buy a lower quantity of goods. Inflation is one of the main factors that reduce the value of your money over time. It means that the money you have at the beginning of the year will get you lesser goods and services at the end of the year.

Detailed explanation-3: -Persistently high inflation erodes the real value of investment capital, requiring a higher nominal return to maintain purchasing power. It also introduces distortions that may affect real economic outcomes, including policy implementation and planning by households and businesses.

Detailed explanation-4: -Inflation reduces the purchasing power of the money. Inflation reduces unemployment. The price of goods and services become more expensive. An inflation rate of 2% to 3% is good for the economy but higher rates of inflation can be very bad for consumers and the economy of a nation.

Detailed explanation-5: -“Inflation risk” refers to the risk of a loss of your future purchasing power if the value of your investments doesn’t keep pace with inflation.