Question

Inflation is both good and bad for us. Identify two ways/causes/reasons that inflation can benefit you personally. And, identify two reasons/causes/ways that inflation harms you personally. Try to think outside the box on this one.

Answer 1

Inflation is beneficial when:

• I am a borrower, Inflation tends to transfer the wealth from the lender to the borrower. IF I am a borrower then the inflation is beneficial.  
• Inflation can boost growth, inflation is nothing but an increased demand in the economy which can't be fulfilled by the present supply capacity. The higher the unfulfilled demand the higher the inflation. So, sustained inflation allows the supplier to increase the capacity and grow the economy. Without inflation, there will be no growth.

Why iNflation is harmful:

• The decline in the purchasing power: An inflation cause a decline in the purchasing power of the money and affect the purchasing power of people living in the fixed income like pensioners, salaried employee etc.
• Reduce the value of saving: Inflation as it decreases the purchasing power it decreases the value of saving in the economy.