Inflation can erode the purchasing power of money from "summary" of The Economics of Money, Banking and Financial Markets, eBook, Global Edition by Frederic S. Mishkin
Inflation is a persistent increase in the overall level of prices in an economy. When prices rise, each unit of currency buys fewer goods and services. This means that the purchasing power of money is reduced as inflation erodes the value of money over time. For example, if the inflation rate is 2% per year, then a basket of goods that cost $100 this year will cost $102 next year. This implies that the same amount of money can buy less in the future than it can today. Therefore, inflation can be seen as a tax on holding money because it reduces the amount of goods and services that can be purchased with a given amount of money. The erosion of the purchasing power of money can have significant implications fo...
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