Inflation Impact, Financial Tools, Monetary Policy & Growth
Classified in Economy
Written at on English with a size of 4.64 KB.
Effects of Inflation
- Loss of Buying Power: When inflation occurs, the prices paid by economic agents for goods and services are higher, which reduces the purchasing power of money.
- Uncertainty: Prices contain valuable information for economic agents to make decisions. Inflation alters prices, destroying their capacity to inform and provoking uncertainty.
- Loss of Competitiveness of Domestic Production Overseas: This will increase the volume of our exports of goods and services.
- Unemployment: The two effects of inflation signals cause a break in the level of employment. If money loses purchasing power, consumption and investment fall. As global demand decreases, so do production and employment. If economic agents are making decisions under conditions