Many of us only have a general idea of inflation. But of course, inflation is more than commodities being more expensive. Actually, it plays a big role in anyone’s finances on a daily basis be it from income, cost of merchandises to how much you will be earning from your retirement years.
What’s Inflation and How it is being Measured?
Inflation is quite basic. It is the rate to which services and goods are increasing in value. In return, this is also where dollar drops in value. Let me give you a quick example:
A latte today may be costing you 3.50 dollars rather than 3.25. Meaning to say, your dollar can buy less for the latte. Same product but now, your money can buy less of it. In a way, your dollar has lesser value.
Economists are measuring inflation by using a metric known as CPI or Consumer Price Index. This CPI uses a basket of services and goods from whether it is foods, medical expenses, transportation costs and the likes. Once done, it is averaging it to have a general idea of how the prices move. Whenever the CPI has gone up, this means that the inflation is in motion.
Rise and Fall
Simply put, when there is a rise in inflation, consumers can feel the strain. We are searching for different ways to be frugal and on the constant look out for bargains. But when it is slow, general consensus is quite remarkable.