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Inflation is the sustained increase in price level.
It usually has negative aspects to inflation, but it has some positive effects as well. Firstly, inflation is more desirable than deflation in most situations. This does not include hyper inflation by the way.
Secondly, inflation shows economic growth, or at least it reflects some economic activity.
The major positive aspect is that it helps smaller firms grow to larger firms. Assuming that both firms A and B sells similar goods. A is a large cooperation with economies of scales and B a smaller firm without economies of scale. Therefore the prices of goods A would be less than good B. Assuming that the inflation rate is 10%. The price of good A is $9 and inflation causes it to increase to $9.90. And for good B, since the cost of production is higher, it costs $10. And with inflation pushing it up to $11. The proportion of increase is similar, but the real price increase is different, firm A $0.90 and firm B $1. Thus firm B having a $0.10 increased revenue more than firm A.
Resulting in a larger benefit, ceteris peribus cost of production does not increase in proportion and other factors equalized.
Wiki User
∙ 16y ago
Wiki User
∙ 9y agoAdvantages include: Moderate inflation enables adjustment of wages, Inflation enables adjustment of relative prices and inflation can boost growth. Inflation occurs when there is a sustained increase in the general price level.
Wiki User
∙ 12y agoit increase the growth of the country
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What are the links between inflation and the economy?
on increasing inflation economy growth decreases
What is Zero inflation and Mild inflation?
Zero inflation is where the economy reach a state of 0% inflation rate. This is not really good in the sense that it shows the economy is stagnant/not growing. This may turn away the investors. Mild inflation is basically low rate of inflation around 2% to 3%. Mild inflation shows that an economy is stable and indicates economic growth.
Is inflation harmful?
Too much inflation will ruin the economy but small levels of inflation will spur growth. Inflation is very harmful to any economy because it can ruin the economy's development and growth and this is not suppose to be. Inflation is also very harmful to any economy because the people living in that economy might not survive the situation and this is when you see that an economy is affected and if nothing is done to it, it can cause an economy to collapse.
How do monetary policy control inflation?
Monetary policy can have an impact of inflation. The ideal state of the economy is a balance between inflation and unemployment at 4.3% which is only seen in a wartime economy.
In the absence of unexpected shocks does the economy tend to experience inflation or deflation?
inflation
What are the links between inflation and the economy?
on increasing inflation economy growth decreases
What is Zero inflation and Mild inflation?
Zero inflation is where the economy reach a state of 0% inflation rate. This is not really good in the sense that it shows the economy is stagnant/not growing. This may turn away the investors. Mild inflation is basically low rate of inflation around 2% to 3%. Mild inflation shows that an economy is stable and indicates economic growth.
Is inflation harmful?
Too much inflation will ruin the economy but small levels of inflation will spur growth. Inflation is very harmful to any economy because it can ruin the economy's development and growth and this is not suppose to be. Inflation is also very harmful to any economy because the people living in that economy might not survive the situation and this is when you see that an economy is affected and if nothing is done to it, it can cause an economy to collapse.
How do monetary policy control inflation?
Monetary policy can have an impact of inflation. The ideal state of the economy is a balance between inflation and unemployment at 4.3% which is only seen in a wartime economy.
In the absence of unexpected shocks does the economy tend to experience inflation or deflation?
inflation
Economic term for an economy with rising inflation and unemployment?
This is called inflation or more precisely "price inflation".
The idea that too much money in the economy causes inflation?
quantity theory: Theory that too much money in the economy causes inflation.
Could you tell me some points on Inflation rate its advantage and disadvantage?
Inflation rate of a country is the rate at which the price of essential commodities in a country is increasing. There is no specific advantage of Inflation, but all country's need to have inflation. If prices of commodities do not go up, then the country's economy is said to be in a stand still. An inflation rate of around 5% is considered a healthy inflation rate and it represents an economy that is growing at a steady pace Disadvantages: When the inflation of a country goes beyond control say for example 10% or more then it has a lot of ill effects on the country & its citizens 1. The spending power of the common man comes down 2. Essential commodities prices shoot up and people cannot afford things like food, clothing & shelter etc...
Advantages of inflation accounting?
An advantage of inflation accounting, is that it can correct problems with inflation. The negative part about inflation accounting is that it is not fair value accounting.
Can you give a sentence for the word inflation?
Inflation of goods and services occurs when the economy grows.
Why did the us economy collaspe in 1929?
inflation
When oil and energy prices rise the economy tends to experience what type of inflation?
natural inflation
