Question

inflation is necessary evil discuss this statement?

Answer 1

• Inflation refers to the rise in prices in the Economy.
• While deflation is the fall in prices in the Economy.
• Inflation has many adverse effects in the Economy and its people.
• But still it is sometimes necessary.
• Hence it is called a necessary evil.
• Even though inflation causes the prices to rise,it will not cause the Employment and output levels to drop.
• Inflation is called evil because

1. It increases Economic inequalities.
2. It effects poor more than the rich.
3. It distorts the equitable distortion of wealth etc.

• But inflation is also necessary because
• Inflation occurs when there is increased aggregate demand in the society.
• If there is no inflation,then there will be no competitive demand for goods.
• With increased aggregate demand, productivity also increases.
• Wages and tax revenues in an Economy rise due to inflation.
• This Ensures healthy growth of Economy.
• Hence some amount of inflation is very necessary to promote Economic growth.