cost of living adjustment

Cost of living is the cost of maintaining a certain standard of living. Changes in the cost of living over time can be operationalized in a cost-of-living index. Cost of living calculations are also used to compare the cost of maintaining a certain standard of living in different geographic areas. Differences in cost of living between locations can be measured in terms of purchasing power parity rates. An sharp rise in the cost of living can trigger a cost of living crisis where purchasing power is lost and the previous lifestyle is no longer affordable.

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