Inflation is the rate at which the cost of living increases and causes money to loose its value. In other words, it will not buy the same amount of good or a service in future as it does now or did in the past.
For Ex: a person getting a salary of 5000$ per month, after all expenses, he plan to save a portion of his salary say $ 1000 per month for future to meet education of his children, marriage and other similar things.
Suppose annual rate of inflation is 8% and bank interest is 7.50% per annum. It means that the real return you get from your saving is -0.50%. investing money will be fruitful only when you get a positive real return. In other words, the aim of investment should be provide a return above the inflation rate to insure that the investment does not decrease in value.
Inflation
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