Why is inflation a problem?
Quick Answer
Inflation can be a problem when it is unexpected or very high, which can result in economic instability and people being afraid to spend money, which hinders economic growth. Furthermore, inflation can make products and services unaffordable to those on fixed-income. It can also cause creditors to lose money and create a negative impact on a country's trade.
Continue ReadingFull Answer
When inflation rises faster than wages, people have less purchasing power. This is especially true for retirees and others who may have a fixed income. Creditors may also lose money if they do not consider inflation in the calculation of loan interest. Inflation can also make the prices of domestic products less competitive when compared to other countries' prices. Additionally, it also costs businesses money to update labels, menus and other lists when inflation causes the prices of goods and services to rise.
Learn more about EconomicsRelated Questions
-
Q:
Why is inflation both good and bad?
A: Inflation at an acceptable low stable rate is good because it increases economic output and productivity while generating employment opportunities. Inflati... Full Answer >Filed Under: -
Q:
What is economic instability?
A: Economic instability refers to a community or nation experiencing financial struggles due to inflation, consumer confidence issues, unemployment rates, and... Full Answer >Filed Under: -
Q:
What causes GDP to increase or decrease?
A: There are many different things that affect the GDP, or gross domestic product, including interest rates, asset prices, wages, consumer confidence, infrast... Full Answer >Filed Under: -
Q:
Why is trade deficit a problem?
A: A trade deficit can be a problem because it indicates a lack of markets for a country's exports, reducing the amount of capital flowing into the country fr... Full Answer >Filed Under:
You May Also Like
-
Q:
What is the price elasticity of demand?
-
Q:
What does the law of supply state?
-
Q:
When you have a problem with an item that is not working, what can you do?
-
Q:
What are the major determinants of price elasticity of demand?
-
Q:
Are there any major buyers of harvested ginseng?
-
Q:
What is an economic perspective?
