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    Inflation and the consumers

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    What is inflation, and how does it affect consumers? Is inflation always bad? Describe a situation where inflation is positive.

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    What is inflation?

    Ord (2012) defines inflation as "the measure of price increases within a set of goods and services over a period of time". The author further said that the most common gauge of inflation is known as the CPI, or consumer price index, which measure the price increases (decreases) of basic consumer goods and services.

    How does it affect consumers?

    Those on fixed incomes suffer the most because the cost of things they are buying increases but their income stays the same (McMahon, 2011).
    In a related article, McMahon (2007) said that "the biggest losers due to inflation are those willing to loan money". He further illustration this example during the hyper-inflation of 1923 in Germany: "If you had loaned a friend enough money to buy a car in early 1923 and he had repaid it at the end of 1923 you might have been able to buy a box ...

    Solution Summary

    The solution discusses inflation and how it affects the consumers.