Final answer:
Inflation affects the purchasing power of money, making a dollar worth less over time. Hyperinflation can render the value of currency nearly worthless. Inflation complicates future financial planning and can harm savers while benefiting borrowers.
Step-by-step explanation:
Inflation directly affects the value of money over time, indicating that a dollar today will almost certainly be worth less than a dollar tomorrow. Inflation represents the general increase in prices and a corresponding decrease in the purchasing power of money. This means that you would not be able to buy the same amount of goods or services for one dollar that you could have previously, before the inflation occurred.
In terms of hyperinflation, such as the case in Zimbabwe in the early 2000s, the value of money can deteriorate to the point where the face value of currency—like the $100 trillion Zimbabwean bill—becomes almost meaningless. While inflation can have little immediate economic impact if wages and prices increase uniformly, it poses a challenge for future planning and can hurt those whose income does not increase along with inflation. For borrowers, however, paying off debt with less valuable dollars can be an advantage.