How does inflation affect the economics of a country?

2 Answers

anra | 1 year, 4 months ago

In simple terms, Inflation refers to the increase in price level of goods and services over a period of time. Inflation leads to the erosion of the purchasing power of money, which means that you can buy less goods or services with the same amount of money. Inflation has powerful impact on the economy of a country. Excessive inflation may have negative impact on the level of investment in the economy, since the profits generated in future will have lesser purchasing power.
Similarly, Inflation also has negative impact on the quantum of savings in the economy. However, the complete lack of inflation also has negative impact on the economy since there is no incentive on production. Most of the economies try to maintain low and steady rate of inflation. Inflation level can be artificially manipulated by monetary policies.

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raulvb | 1 year, 5 months ago

Inflation rates do affect the economics of a country, because it has an impact in the economic growth of a nation. Thus the link between inflation and how the economy of a country is doing is evident. The economy can be managed by trying to control the inflation elements of the process, which is the continuous and systematic cycle of general price increase. There are two main issues to look at, one is to avoid as much as possible the abrupt overall price increase of goods and services. The other is to control the excessive and fast price increase of a narrow group of goods or services, especially if they are directly connected to important sectors of the economy. More information about inflation rates and other topics can be seen in this link:

http://www.global-rates.com/economic-indicators/inflation/inflation.aspx

Enjoy the research!

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