If people spend more money due to inflation, how can this affect the economy?

Answer 1

It will make people go broke- faster; have LESS money to pay their bills; get their Utilities shut off; lose their Homes & Apartments- & then Increase the Homeless Population by 38%... In Short, the Economy will tank. :(

Answer 2

Inflation increases the cost of living which reduces peoples ability to save or invest money. Increased prices of consumer goods affects the supply and demand by reducing the demand because people can't afford to buy the product. This, in turn, affects the profitability of companies who cannot sell their projected level of products which in turn results in them laying off workers because of decreased production requirements. The affects of long term inflation can have a devastating affect on the economic stability of a country. Eventually you'll see high inflation, high unemployment, high interest rates and a depressed stock market all of which will reduce the country's gross national or domestic product.