2006-11-18 07:16:31 · 7 answers · asked by nvan5 2 in Social Science ➔ Economics
I think the most logical answer would be because it invariably leads to hyperinflation, but my other options are 1.) reduces everyone's standard of living. 2.)usually is accompanied by declining real GDP and 3.) arbitrarily redistibutes real income and wealth
2006-11-18 07:29:20 · update #1
a small amount of inflation is a good thing as it pressurizes wages acting to push too highly paid jobs down the pile (people will always disagree with a paper pay cut but not with a relative pay cut i.e. say on 20k a year despite inflation of 10% which would mean you would want 22k next year).Also it provides a buffer against deflation which is a bad thing.
The argument for stable prices ( 0 or small inflation) is that it allows for easy planning for the future for businesses and lowers shoe leather costs (how much it costs to constantly change and barter prices). It could also be argued that low inflation encourages saving by lowering the spread between the interest rate and the savings rate but theory would suggest that there should be no difference as there is a constant margin.
A level of inflation is also indicative that the economy is running near a full level of employment as there is a push on wage prices. This is a good thing as there are a large number of jobs to go around.
In the long run a low inflation rate means that your countries currency rate will be more competitive against others as they will be depreciating in value faster.
Then again economists will always disagree.
2006-11-18 14:58:16 · answer #1 · answered by sir_krippen 2 · 0⤊ 0⤋
i'm leaning in the direction of c. Inflation not often bring about hyperinflation. it oftentimes happens together as the financial device is in a enhance so won't be able to be b. It would not redistribute real income or wealth. So c is left.
2016-12-29 04:54:16 · answer #2 · answered by ? 3 · 0⤊ 0⤋
In simple terms inflation means you have to work harder to earn more money to buy the same ammount of food/clothing/whatever as you did during a period of low inflation.
2006-11-18 07:37:36 · answer #3 · answered by Anonymous · 0⤊ 0⤋
it creates a unstable environment. Prices change frequently which affects business plans, personal spendings...etc
2006-11-18 07:22:46 · answer #4 · answered by Quantum 2 · 0⤊ 0⤋
Because prices go up immediately while wages tend to lag.
2006-11-18 07:18:12 · answer #5 · answered by Chris J 6 · 0⤊ 0⤋
cuz it lowers the value of money
2006-11-18 07:18:28 · answer #6 · answered by KitKat 2 · 0⤊ 0⤋
You already have the answer there.
2006-11-18 15:54:03 · answer #7 · answered by floozy_niki 6 · 0⤊ 0⤋