The Positive And Negative Effects Of Inflation On The Economy

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For those who may not know what inflation is: Inflation is an increase in the price of goods and services in an economy over a certain time. So when a price rises, each unit of currency buys less than what it would have before, and then obviously when the price of a good or service decreases, each unit of currency buys you more than what it would have previously. Inflation can have both positive and negative effects on an economy. Negative effects of inflation are; possible shortages of goods as people buy in bulk in fear that the price will increase again and the chance of a lack of investment due to uncertainty of future inflation. The positive effects are there too, of course, they are: a high rate of inflation enables a boost in economic growth. Often in times of very low inflation, the economy is said to be stuck in a recession. Inflation has an impact on the consumer when looking at spending, saving and interest rates. Spending, for some people could depend entirely on the rate of inflation at the time, if the rate of inflation is too high, they might not have the money to afford to pay for a good or service, when the rate of inflation is low they can afford it. When and how people spend might depend on the time of year and how much of a necessity the good or service is, especially during times of economic unrest when people mightn’t have as much discretionary expenditure. Saving during times of high inflation may also be difficult. For example, say you have €100
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