How does inflation affect the economy?

Can you explain how inflation affects the economy?

Sure! Inflation refers to the general increase in prices, which can erode purchasing power and impact savings.

What are the main causes of inflation?

Main causes include demand-pull inflation, cost-push inflation, and built-in inflation, each affecting prices differently.

How does inflation impact interest rates?

Typically, central banks raise interest rates to combat high inflation, which can slow down economic growth.

What are the effects of inflation on consumers?

Inflation can lead to higher costs for goods and services, reducing consumers' purchasing power and savings.

Is inflation always bad for the economy?

Not necessarily! Moderate inflation can indicate a growing economy, but high inflation can be harmful.