Inflation affects the value of goods and services because purchasing power parity is a fundamental determinant of exchange rates. Inflation in one country translates into a rise in the price of goods and services in one country, whereas the value of products in other countries remains unchanged where inflation is subdued. The result of this discrepancy is that the currency of the country experiencing inflation plummets against those other currencies which aren't; it is a devaluation of their currency.
- What is Inflation?
- What is Inflation currently?