For many central banks, the primary goal is to control inflation.?

Question

For many central banks, the primary goal is to control inflation.
a. What are the costs of inflation?
b. Does anyone benefit from inflation? If so, who benefits and how?

Answer 1

The main role of Central Bankers is not only to keep control over inflation but also unemployment rate, prices, credit off take, growth in Economy etc;.
a)Cost of inflation is very severe. High inflation can reduce purchasing power ultimately kill the buying power of the populous and even lead to damage of the economy. A certain level of inflation is though harmless because it increases the employment. There is something called the Philips curve which depicts the negative correlation between inflation and unemployment. Higher the inflation lower the unemploment. Central Bankers nowadays prefer controlled inflation targets to maintain employment growth. Ben Benake the present Fed chairman is an expert on this.
b)Benifits is as I said above. It can create employment in the economy. Hyperinflation can be detrimental but controled inflation targets are benificial by way of which economy can meet employment targets.

Former consultant to Federal Reserve, USA.

Answer 2

Actually, governments love inflation because a) they are very big borrowers and there is nothing better than paying back borrowed money with money that is worth much less. b) inflation raises tax revenues which governments also love.

Central banks do attempt to control inflation. The key word is control. If they can keep it under 5%, the electrorate does not seem to mind and will not dispose the current administration.

You should know what the costs of inflation are. No one should have to explain them to you.

Answer 3

Inflation is a Good/Bad scenario, it can be good in some ways, and bad in others, for example, houses; real estate for houses right now are majorly inflated, to an obsurd amount, making it difficult for anyone to buy a house.

The costs for inflation can be pretty severe sometimes, as for who will deal with those costs, usually varies.

Answer 4

1) Yes.
2) Nobody wants to buy a $249,000.00 USD 2007 Ford Explorer.
3) No.