How does INFLATION impact a nation’s economic health? Please consider and address both the positives and the negatives. Why is inflation both good and bad?
How does INFLATION impact a nation’s economic health?
How does INFLATION impact a nation’s economic health? Please consider and address both the positives and the negatives.
Why is inflation both good and bad?
Inflation at an acceptable low stable rate is good because it increases economic output and productivity while generating employment opportunities. Inflation could be bad also because essential goods and services become too expensive and unemployment increases, which destabilizes the economy.
How does inflation affect consumers?
From a consumer viewpoint, inflation increases the cost of goods and services, i.e. the cost of living. If the consumer’s income increased at the same rate as inflation, they wouldn’t be negatively affected, because they would have more money in order to pay for their (now) more expensive needs.
Is inflation good or bad for economy?
When inflation is too high of course, it is not good for the economy or individuals. Inflation will always reduce the value of money, unless interest rates are higher than inflation. And the higher inflation gets, the less chance there is that savers will see any real return on their money.
How does the economy affect people’s lives?
When the economy is in a recession, people face job loss, which may affect children’s education, living arrangements, social activities and even fertility. Everyone is affect by the economy in some way. In some instances, the changes can be profound enough to last for decades.
Who benefits from inflation?
Does Inflation Favours Lenders or Borrowers? Inflation can benefit either the lender or the borrower, depending on the circumstances. If wages increase with inflation, and if the borrower already owed money before the inflation occurred, the inflation benefits the borrower.
What is the best inflation rate?
What is an acceptable level of inflation? The Federal Reserve has not established a formal inflation target, but policymakers generally believe that an acceptable inflation rate is around 2 percent or a bit below.