Before experiencing the real effects of inflation, I did not comprehend the meaning of this common but confusing term. Grillo Thomas’ article “Rising Food & Gas Prices a Real Downer” also served as an eye-opener for me. To consumers and businesspersons with fixed income, it is a headache and losses. It reduces the consumers’ ability to purchase products and increases their family needs or budgets. It has also reduced consumers’ ability to save. This means that the consumers will not develop economically. This can be attributed to the fact that the prices of every commodity that my family uses have almost doubled.
In relation to families with the fixed income, inflation has led to dwindling savings. For example, my family runs on loans that take long to repay. This is because these loans have lower interest rates that take less share of income within a longer period (Grillo, 2011). Compared to the previous years, my family has lost some of its wealth repaying debts and purchasing basic needs. Moreover, I cannot save, because the consumption rates have gone higher. Consequently, inflation has made it difficult for us to accumulate capital meaning; there is no progress for our family due to the lack of investment.
Speaking about business with fixed income, inflation has led to lesser profits, if not losses due to abnormal increase in cost of production making expenses to supersede revenue. Inflation reduces not only profits but also sales for companies, because some consumers prefer purchasing selectively during such period or keeping their money for precautionary motive. This is the highway to losses. It also affects the business plan since the businesses experience many problems with budgeting and are unable to allot resources well for various purposes. My first-hand experience of inflation together with Grillo’s article has made me realize that inflation has both benefits and demerits in business. Nonetheless, the benefits are short-term