What are the concerns, major and minor, with inflation? I'm not exactly sure why it's such a bad thing.
2007-02-22 08:43:35 · 7 answers · asked by Tina 5 in Social Science ➔ Economics
Inflation is a problem because it reduces your "purchasing power".
For example this year, a starbucks latte cost $1.25, but next year inflation rises by a certain percentage and it costs you $1.85 to buy the same latte with the same amount of dollar to obtain the same good.
Your money is worth less because you need more of it to substitute/exchange/buy your latte. If coffee is minor, think about the effects it has on multi-million dollar investments. For example, a firm expects a certain percentage of return on their asset or equity, but due to inflation, they are receiving less in their ROA/ROE and therefore makes the outcomes undesirable.
2007-02-22 18:09:28 · answer #1 · answered by Anonymous · 0⤊ 0⤋
Spider Web ... Yes, inflation has a very destabilizing effect on economies. Inflation's effect on an economy is like the effect that waves have on a pleasure cruise.
In a perfect world, prices, costs, profits, and personal incomes would rise in unison. It can never work out this way, though.
See my link below which specifically addresses the problems caused by inflation. Scroll to the top of that page for the whole picture.
2007-02-22 18:36:18 · answer #2 · answered by Anonymous · 0⤊ 0⤋
It isn't, so long as it doesn't get out of hand. When inflation becomes rampant, prices for goods increase much faster than peoples wages. The poorer people are hit the worst as their income is suddenly insufficient to cover the basic needs. As the inflation becomes worse the middle class join the poor and the currency becomes basically worthless. In Germany in the 1930's inflation was so bad that it took a wheelbarrow load of money to purchase a loaf of bread.
2007-02-22 17:01:54 · answer #3 · answered by mustanger 5 · 1⤊ 0⤋
As long as the inflation is minor, there is not a problem. In fact, slight inflation is healthy for economies in general --- due to psychological effects related to wage increases.
2007-02-22 23:36:05 · answer #4 · answered by Anonymous · 0⤊ 0⤋
I don't like inflation because the prices for goods and services rise dramatically.
2007-02-22 19:28:52 · answer #5 · answered by General Vic 2 · 0⤊ 0⤋
Prices are going up, but so is the cost of living.
Here's a good website!
http://mwhodges.home.att.net/inflation.htm
2007-02-22 17:46:09 · answer #6 · answered by Shelb-N-Ator [[H!ATD]] 3 · 0⤊ 0⤋
Because prices rise, we have to pay more money, and we don't always get a promotion or raise at our jobs.
2007-02-22 16:47:52 · answer #7 · answered by ~*Natasha*~ 3 · 0⤊ 0⤋