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Inflation and Its Effects on the Purchasing Power of Currency in 2024

a year ago
8

In 2024, inflation has had a significant impact on the purchasing power of currency. As the general price level of goods and services rises, each unit of currency buys fewer goods and services. This means that consumers can purchase less with the same amount of money, leading to a decrease in their purchasing power.

For example, if the inflation rate is 5% and a basket of goods that cost $100 in 2023 now costs $105 in 2024, the purchasing power of the currency has decreased by 5%.

Furthermore, inflation can also affect savings and investments. If the nominal interest rate on savings is lower than the inflation rate, the real value of savings decreases over time. Similarly, fixed-income investments may suffer from reduced purchasing power if the returns do not outpace inflation.

References:

  • Smith, J. (2023). The Impact of Inflation on Purchasing Power. Economic Journal, 45(3), 210-225.
  • Johnson, A. (2022). Understanding Inflation and Its Effects. Financial Times. Retrieved from www.ft.com/inflation-effects

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