Economics Assignment On Inflation Measuring The Cost Living (Essay Sample)

Inflation and Cost of Living
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Abstract
The paper provides a summary and outline of the selected topic, Inflation and cost of living. It is divided into two parts. Part I is the summary while part II is the proposed outline for the paper. The cost of living in an economy is a consumer-focused number, which provides a measurement of how much they have to spend to realize a certain lifestyle given the state of inflation. The whole idea hangs in the balance with the cost of a putative standard of living which touches on several variables, including housing, transportation, food, utilities, healthcare, education, and taxes. Based on the location of an individual household, the cost of accessing these necessities changes, as does the inflation rates. The implication is that with even a slight surge in the rate of acceleration, the amount spent out-of-pocket increases at a faster rate since one requires a bundle of necessities, not one. The cost of living may then grow to the extent that it becomes unbearable.
Part I: Summary of Inflation and Cost of Living
In a free market economy, inflation refers to the situation in which prices of goods and services generally increase over a given period. Inflation within an economy denotes the extent to which prices have escalated, making it a broad, economy-focused number. Inflation also points to a shrinkage in the actual purchasing power of money. Therefore, if the households’ income and saving do not increase at a rate equal to that of inflation, then it is highly predictable that they are likely to grow poorer. For instance, with 6 percent rate of inflation, households are likely to purchase 6 percent fewer baskets of goods and services, given that their incomes and saving remains unchanged. Significantly, this point to an increase in the cost of living in the same economy.
Certainly, most consumers in both free and non-free market economies are conversant with the term Consumer Price Index (CPI), which is the broad measure of inflation. As a stick of measurement, the CPI helps individuals, governments, and businesses plan and fine-tune financially to the bearing of inflation on the cost of living. A clear-cut example is the case of social security benefits, which are fine-tuned yearly to levels equivalent to variations in the CPI, popularly known as cost-of-living adjustments. Besides these benefits, other payments adjusted in this manner include household rents, wages, federal tax brackets, child support payments and alimony payments.
Therefore, cost of living in an economy is a consumer-focused number, which provides a measurement of how much they have to spend to realize a certain lifestyle given the state of inflation. The whole idea hangs in the balance with the cost of a putative standard of living which touches on several variables, including housing, transportation, food, utilities, healthcare, education, and taxes. Based on the location of an individual household, the cost of accessing these necessities changes, as does the inflation rates. The implication is that with even a slight surge in the rate of acceleration, the amount spent out-of-pocket increases at a faster rate since one requires a bundle of necessities, not one. The cost of living may then grow to the extent that it becomes unbearable.
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