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Inflation is a sustained rise in prices. Inflation is measured by retail price. It measures the average price level of a basket of goods. The effect of inflation on consumers is very significant:
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Business studies Test Questions Inflation is a sustained rise in prices. Inflation is measured by retail price. It measures the average price level of a basket of goods. The effect of inflation on consumers is very significant: * Reduces purchasing power and standard of living if wages do not ride at the same rate. * Reduces value of savings - if interest rates are lower than inflation, but loans would be worth less so some consumers may benefit. If inflation occurs, it will reduce purchasing power because you will have the same amount of cash before the inflation; however it will be worth less. Standard of living will decrease due to needs increasing in price, due to inflation. The value of your savings would lose value because the cost of living is higher. I.e. if I have saved £1 to buy 2 loaves of bread, each loaf is 50p. However, recently inflation has doubled prices....
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