What is Inflation?

Inflation is a general rise in prices of goods and services. It happens when there is too much cash chasing after too few goods or when the cost of production rises.

Inflation Arises Due to Two Factors:

Some Effects of Inflation on Consumers

1. Consumers suffer from lower purchasing power when prices increases.
   
   



2. Consumers may face difficulty in maintaining their living standards as more money is needed to buy the same quantity of goods and services than before.
   
   



3. Higher borrowing cost for borrowers as banks may increase interest rates if the central bank raises the rates to control inflation.
   
   



4. Erodes your retirement fund if it is not invested wisely because inflation reduces the real value of money over time.