How does inflation effect the cost of living in a particular country? Does low inflation mean expensive prices
Answer:
Inflation can be thought of as the change in the cost of living. So low inflation can be consistent with a relatively high level in the cost of living.
The level of the cost of living has to be referenced to something to get any meaning. If you want to compare the cost of living across countries then you need to compare the cost of a basket of goods and services in a common currency. See if you can find a reference to the 'Big Mac Index' to compare the cost of a burger!
The problem in such calculations is the exchange rate between currencies of different countries. Because sterling is quite strong, the UK seems an expensive place relative to many other countries. Although much of the euro area is more expensive than the UK.
And then the true cost of living depends on earnings too. China may be cheap for someone from the UK but not so cheap for someone doing the same job in China.
By the way, dont confuse the cost of living in London with the that of the UK. London is much more expensive for most things than most other cities in the UK - just compare beer prices!!
No. Inflation is simply the change in prices.
Inflation is a condition where there is surplus money in the economy, due to which there is a rise in prices of comodities.
the cost of living in a country increases with inflation over a period of time. sudden, short periods of inflation generally do not have a profound effect on the cost of living. but steady inflation over a long period of time does increase cost of living.
Inflation is the rate at which items increase in price. Low inflation means that items only increase by a small amount over a given period. High increases in prices means high inflation. The cost of the item can vary from country to country so the cost of living will depend on which country is involved.
Inflation is the general rise in prices over time, and mathematically it is the rate of change in the price of a certain basket of goods. Inflation becomes problematic where real income does not keep up with it.
Inflation affects the cost of living within a particular country by increasing the level of prices. Note that this is a very general definition, and purposefully so. Measures of inflation, such as CPI, are broken down into dozens of different measures: those that include or exclude energy or food prices; retail price indexing; rental indexing; health care indexing, etc. Note also that not everyone feels the effects of inflation equally. An increase in the price of meat does not affect vegetarians, while an increase in the price of gasoline affects even those who do not drive (via higher transportation costs for goods purchased at markets).
High inflation means that prices rise rapidly, low inflation that prices rise slowly, and deflation means that prices are actually decreasing.
One answerer pointed out that an excess supply of money causes inflation, and while this is one of the causes it is not the only one. Excess demand can also cause inflation - either through an excess money supply or through excessive demand for goods (note wartime inflation, when government defense expenditures push aggregate demand through the roof). Also, a supply crunch causes the most painful type of inflation simply because little can be done about it. Such is the inflation now hitting Iran's energy prices because Iran's access to refineries (for gasoline, since cars don't combust oil) is lower than gasoline demand for a number of reasons.
Inflation is not the only determinant of cost of living - much of it has to do with the level of supply and demand in a given country, and what sort of living you're talking about. Iceland is horrifically expensive to live in, partly because so much of the cosmopolitan society requires imports. The U.S. is quite expensive to live in, though inflation is quite tolerable at this point, because of the high standard of living (think of all the technology, large meal portions, and health care that American families come to expect).
There are likewise nations with high inflation and a low standard of living - Zimbabwe for one has a low standard of living relative to European nations and a very high rate of inflation (hence T-bills pay a 66% rate of return).
Japan is an example of a nation with a very high cost of living (mostly due to its need for imports and a lack of land) but with negative inflation, or deflation, due to monetary policies and a collapse in some financial sectors nearly a decade ago.
High inflation means prices rising consistently. Now, prices for commodities depend on the cost of resources available to produce the commodities. Therefore you can have high prices for commodities in a country where inflation is low..
The answers post by the user, for information only, FunQA.com does not guarantee the right.
More Questions and Answers: