What is the impact of inflation on the economy?

What is the impact of inflation on the economy?

Inflation affects purchasing power, interest rates, and overall economic growth. It can lead to higher costs of living.

How does inflation influence interest rates?

Typically, central banks raise interest rates to combat high inflation, making borrowing more expensive and slowing down spending.

What are the long-term effects of sustained inflation?

Sustained inflation can erode savings, distort spending and investment decisions, and lead to uncertainty in the economy.

Can inflation ever be beneficial?

Moderate inflation can encourage spending and investment, as people are more likely to buy now rather than later when prices rise.

What measures can be taken to control inflation?

Governments and central banks can use monetary policy, such as adjusting interest rates, and fiscal policy to control inflation.