The Affect Of Inflation On Cost Of Living

Two factors determine the cost of living of an individual or for a family for that matter. The first being the income earned and the expenses spent on the essential requirements.  Increase in the hike of the prices day to day costs leads to inflation.  The imbalances in the relationship between supply and demand lead to rising.  Prices of certain goods increase due to the more demand for the products and the amount of the product is comparatively less. When the difference in supply and demand occur, it will lead to inflation. Even housing expenses will have more impact on the cost of living which can be learned quickly by going through the website /.

Inflation affecting purchasing power: Inflation can have a significant effect on the cost of living based on the decline in purchasing power.  The standard of living maintained by the individual can be reduced by decreasing the ability to purchase and by increasing the day to day expenses.  Inflation can have more effect on the cost of living as it will reduce the spending power. The rise will have a more significant influence on the people who are retired.  Generally retired people live on fixed income. Growth leads to increase in prices of all goods and services which will reduce the spending power among them.  Wage earners too will face the same consequences when the wages are flat,and the inflation occurs leading to a price hike.

Inflation affects finance: Inflation will force individuals to reduce their spending power or to borrow money to maintain the standards of living. Borrowing may increase their debts and paying interest will be not less than inflation. Hence individuals can reduce their expenses by avoiding gym membership or subscription of magazines. The worst situations may lead the people to shift from the luxuries house to small home.  People will start using public transport rather than using a personal vehicle.  The countries may face a situation where the inflation outburst and it will even become difficult to buy basic needs such as food and water.  The main reasons for inflation are due to the variance in supply and demand. The availability of the goods and services must be as per the market,and the amount must be the same. When there is a mismatch in these two elements it will lead to inflation as the price of the products will increase rapidly.

The government took measures: As inflation will have a more significant impact on the country as well,the government will take necessary steps to control inflation. This will help to increase the standard of living of people.  The government will increase the interest rates as the borrowing cost increases;this will automatically decrease the disposable income of the customers and the business. As the demand for the goods falls, the retailers will reduce the prices to sell the surplus inventory. The government can also cut down inflation by manipulating currency prices.  This will have a significant effect on exports and imports. The decrease in the value of the specific currency will in turn help to decrease the imports.  Thus the inflation can be reduced.  The government has no power to control energy prices and oil prices.