Inflation often gets a bad rap... Is inflation always a negative thing for an economy? Does...

Inflation often gets a bad rap... Is inflation always a negative thing for an economy? Does inflation have any pros? Give examples and explain.

Expert Solution

Inflation refers to the general rise in the price level of all goods and services within the economy.

Even though it is often considered as a negative aspect of an economy, it is not always a negative thing for an economy.

Yes it does have some positive aspects too. Inflation may increase the current demand for any good or service. For example when an economy is facing inflation, people will expect the prices to be high in future too. They hence prefer purchasing goods and services at the present, thereby increasing the current demand.

Inflation also helps in combating the negative effects of a deflation which is much worse for an economy when compared to the negative aspects of an Inflation.

When inflation is maintained at a moderate rate, it is usually beneficial for the investor's. This is because, higher prices Increases their expectations of receiving higher returns. This will in turn lead to an increase in the employment rate and stimulate greater labour demand.

For example when the inflation rate is between 3 to 5%, economy will benefit from inflation as the rate of inflation will be much moderate. But beyond this rate, the inflation becomes very serious and creates havoc within the economy.

Rahul Sunny answered 2 years ago

We often hear of inflation characterized as a bad thing, but Meyer describes both winners and...

We often hear of inflation characterized as a bad thing, but Meyer describes both winners and losers from inflation. Give an example of one way in which you would win from unexpected inflation, and an example of one way in which you would lose from unexpected inflation.

Is unionization a good thing or a bad thing for employees, business, the economy, society, etc.?...

Is unionization a good thing or a bad thing for employees, business, the economy, society, etc.? 1. Present both sides of the argument. Use information from the text and other course documents to support your arguments (topics should include the efficiency, equity, and voice triad; the four schools of labor relations; and other information from the book and course document.) 2. Based on the two arguments above, discuss your opinion of the efficacy (effectiveness) of the labor movement and if...

Unlike other mental skills, imagery tends to get a "bad rap" because it doesn't always LOOK...

Unlike other mental skills, imagery tends to get a "bad rap" because it doesn't always LOOK cool. I've even heard it referred to as "Hocus Pocus." Assuming that you're convinced that imagery works, how could you (as a Coach or leader) convince your team that imagery is an important part of their training regimen?

what is the good and bad of inflation in the economy of a country

Inflation is usually considered to be a bad thing, but some economists have recently suggested that...

Inflation is usually considered to be a bad thing, but some economists have recently suggested that more of it might be good because it would help with the national debt. Can you explain how inflation could make it easier for the government to pay down the national debt?

Fiscal policy is a good thing for the economy? In what ways may it be bad...

Fiscal policy is a good thing for the economy? In what ways may it be bad and/or good for the economy? If you could choose between Keynesian Fiscal Policy or letting the economy self-correct what would you choose? Why?

Explain whether you agree or disagree with the following statement: ‘Inflation is a bad thing because...

Explain whether you agree or disagree with the following statement: ‘Inflation is a bad thing because it increases the cost of living without increasing income in general in the long run.’

Refute the following statement: "Perfectly anticipated inflation does not have any negative consequences for the economy."...

Refute the following statement: "Perfectly anticipated inflation does not have any negative consequences for the economy." Explain your answer.

How does inflation affect an emerging economy, use examples to evaluate the positive and negative impacts...

How does inflation affect an emerging economy, use examples to evaluate the positive and negative impacts of inflation on economic growth. include discussion on impact of aggregate demand and aggregate supply on economic growth.

Trade balance: a) Is trade deficit always a bad thing? Explain you answer in details. Support...

Trade balance: a) Is trade deficit always a bad thing? Explain you answer in details. Support your argument with an example. b) Assume that government provides export subsidies to encourage the export of goods. Will this policy result into an improved trade balance in the long run? Why? Why not? (hint: think about the effect this policy has on real exchange rate)

Question