USA HISTORY

Detailed explanation-1: -Inflation lowers the value of the purchasing power of a currency, having the effect of a price rise. In the traditional economic sense, you would compare the price of a good or service against a price index, such as the Consumer Price Index (CPI) to measure the purchasing power.

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: -Historically, there has been an inverse relationship between inflation and the dollar’s strength. That is, when inflation is high, the dollar weakens.

Detailed explanation-4: -When inflation occurs, prices of goods/services rise Purchasing price of dollar goes down. Purchasing power of dollar is equal to real goods/services dollar can buy. Deflation= prolonged decline in the general price level.