How does inflation affect people’s standards of living and savings?

What will be an ideal response?

Inflation is an increase in the overall level of prices and has a negative effect on people’s standards of living and savings. People are forced to reduce their expenditures when the price of goods and services increases but nominal wages (also known as salaries) do not change. Savings are also affected by inflation because the purchasing power of saved dollars is reduced. For example, a family with saving of $60,000 will be able to purchase fewer goods and services with those dollars if the economy is experiencing inflation.