Is life becoming more affordable?
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We’re heading in the right direction in terms of spending as the cost of living, as measured by the Consumer Prices Index (CPI), has decreased in March by a fraction on February after it dropped to – 0.01 per cent. The cost of living is the amount of money needed to sustain a certain level of living, including basic expenses such as housing, food, transport and taxes.
In the short-term, deflation and the falling cost of living is great news for us as our spending power is boosted. But is deflation good long term? The long-term falling of prices can be a problem for the economy, as if you are like me, you may delay purchases until you get a better price. Therefore the demand for goods and services can subsequently cause the economy to shrink.
I am not an economist, though did an A level in economics many, many years ago, so it’s interesting to try to understand all these terms. If you can add anything interesting, please do in the comments.
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