Analyzing the Effects of Inflation on Households Economic Situation in Zambia: A Case Study of Mufulira District

The economic stability of the country is a major challenge for all governments in the world. This study aimed at analyzing the effect of Inflation on household economic situation. The study was guided by the following specific objectives: to analyze the effect of inflation on households’ consumption; to examine the effect of inflation on households’ saving; and to ascertain the effects of inflation on household income. The study adopted a descriptive case study research design and targeted households in Mufulira District of the Copperbelt Province. Mufulira is one of the old mining towns on the Copper belt Province of Zambia. The town developed around the Mufulira Copper Mine in the 1930s. Mufulira means “place of abundance and peace”. The district has the population of 200,182 people, whose main economic activities apart from mining include farming and hospitality industries. The sample size of 80 participants was used during data collection and participants were selected randomly. The findings reveal that inflation leads to households consuming less food stuff to suit their budget, others tend to spend more money on the same items bought with less income, it was also discovered that inflation reduces purchasing power because it reduces the power of the income. With regards the effects that inflation has on household income, the study revealed that inflation reduces the income of a household, the study further shows that inflation causes households to spend more on goods and services, it causes interest rates to increase on all the borrowed amounts from commercial banks. The findings explain that the standard economic response of consumers to changing relative prices is to shift consumption away from things that have become more expensive may not be an option, especially for the worst off. Furthermore, Cross tabulation has confirmed that inflation significantly influence house hold income, consumption and saving. In conclusion, the study advised that the government, through the Bank of Zambia, create and implement prudent monetary and fiscal policies aimed at decreasing and stabilizing both micro and macroeconomic indicators, including inflation targeting, to boost economic growth.