what are the positive and negative effects of inflation?

Answer 1

to put it in short,the positive effects of inflation are it pushes growth and increases production.to understand thiss better,u must first be able to understand why inflation takes place.
Inflation is the result of too many ppl going after too less goods.eg.10 ppl going wanting to buy the 1 house.what happens is the price of the house goes up.now seeing that there is demand for houses,investors will invest in houses.This leads to spending and therefore growth in a bigber picture.This is the advantage of inflation

The disadvantage is that,it sometimes drives prices up so much that a majority of the ppl can not afford to buy the good.This happens when demand rises for the product but supply remains the same(maybe since it has reached full employment equilibirium).

Answer 2

The effect depend on the prevailing situation. A moderate, gradual price rise is gud. Like 3% per year. Because when the producers of goods want to raise their standard of living, they will deamnd highr price for products, causing inflation. This shows that they're improving economically.

But sometimes, prices are raised in illegal ways, so that only owners get profit, not workers. Their salary doesn't increase. That's a problem.

Answer 3

There are no positive effects of inflation. The negative effect: it screws up the way we count. For example, gasoline prices go up, causing the price of commodities to go up, causing the demand for wages to go up.
Inflation is largely the fault of government over spending and over borrowing, just creating more money to pay the bills. Keep government under control, and you keep inflation under control.

Answer 4

positive effect of inflation is that you will pay less on fixed rate loans. The negative are obvious.

Answer 5

The positive effect is that you have more currency in your hand and that satisfies your ego and increases your sense of well being. The negative effect is that the less privileged and the poor will suffer more, and will find it difficult to make their both ends meet.

Answer 6

A small amount of inflation is often viewed as having a positive effect on the economy. One reason for this is that it is difficult to renegotiate some prices, and particularly wages, downwards, so that with generally increasing prices it is easier for relative prices to adjust. Many prices are "sticky downward" and tend to creep upward, so that efforts to attain a zero inflation rate (a constant price level) punish other sectors with falling prices, profits, and employment. Efforts to attain complete price stability can also lead to deflation, which is generally viewed as a negative outcome because of the significant downward adjustments in wages and output that are associated with it.
Inflation is also viewed as a hidden risk pressure that provides an incentive for those with savings to invest them, rather than have the purchasing power of those savings erode through inflation. In investing inflation risks often cause investors to take on more systematic risk, in order to gain returns that will stay ahead of expected inflation.
However, in general, inflation rates above the nominal amounts required to give monetary freedom, and investing incentive, are regarded as negative, particularly because in current economic theory, inflation begets further inflationary expectations.

Increasing uncertainty may discourage investment and saving.
International trade: If the rate of inflation is higher than that abroad, a fixed exchange rate will be undermined through a weakening balance of trade.
Shoe leather costs: Because the value of cash is eroded by inflation, people will tend to hold less cash during times of inflation. This imposes real costs, for example in more frequent trips to the bank. (The term is a humorous reference to the cost of replacing shoe leather worn out when walking to the bank.)
Menu costs: Firms must change their prices more frequently, which imposes costs, for example with restaurants having to reprint menus.

for more pl. visit:
http://en.wikipedia.org/wiki/Inflation

Answer 7

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Answer 8

positive-rich people survive.negative-poor people suffer