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From ZuluNotes - Free Leaving Cert Notes

Inflation is the continuous rise in the general price level or this is the fall in the purchasing power/value of money.

The rate of inflation is measure by the Consumer Price Index (CPI).

The economic consequences of a rise in price inflation

1. Lower Standard of living:

Because of the higher costs, people have a reduced purchasing power, which causes them to have a reduced standard of living.

2. Increased Wage Demands:

Workers, suffering from a reduction in their standard of living, will seek an increase in wages to compensate for the high living costs.

3. Loss of Competitivness:

If the rate of inflation in Ireland is higher than the rest of our trading partners, this will mean that there will be a loss of competitivness in our exports.

4. Greater Disparity between different sectors of the population:

While those at work may seek a wage increase to compensate for their lower living standards, those that have fixed incomes will have to wait for the government to decide to alter their payments. Greater gaps between these sectors of the may result.

5. Uncertainty:

Rising inflation rates in Ireland creates uncertainty for entrepreneurs/investers and may influence investment decisions.