Effects Of Inflation On The Economy

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Inflation is one of the most important economic issues in the world. It can be defined as the price of goods and services rising over monthly or yearly. Inflation leads to a decline in the value of money, it means that we cannot buy something at a price that same as before. This situation will increase our cost of living.
The Gross Domestic Product (GDP) is the total market value of a country’s output. The GDP is the market value of all final goods and services produced within a given period of time by factors of production that located in the country doesn’t matter they are citizens or foreign-owned companies. Hence, the gross domestic product is the best way to measure the country economy. It has four component such as personal consumption expenditures, gross private domestic investment, government consumption and gross investment and net exports.

The first effect is the purchasing power reduce. When the price of goods rise speedily, consumers become more concern about future costs, prices of goods and services. When inflation rises but the salaries still remain, the purchasing power of consumers may decline, especially for retirees and fixed-income consumers. This is because they are unable to pay for more costs by the same income. They tend to spend less and reduce their standard of living.
Besides that, inflation also influences the business competitiveness. When a country has a high rate of inflation, it may cause the domestic products less

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