Question

5. Inflation is good for the economy. Do you agree or disagree? Explain your answers.

6. What is the multiplier? Does it contribute to microeconomic instability? Explain your answer.

Answer 1

5):Inflation is good:agree because of when it is mild. there are two situations where this occurs.the first is when inflation makes consumers expect prices to continue rising.when prices are going up,people will buy now rather than pay more later.this increases demand in the short term. As a result,stores sell more factories produce more now. they are more likely to hire new workers to meet demand.it creates a a virtuous cycle, boosting economic growth.

the second is when it removes the risk of deflation. that when prices fall.when that happens, people wait to see if prices will drop more before buying.it cuts back demand, and businesses reduce their inventary. as a result,factories produce less and lay off workers.Unemployment rises, leading to wage deflation.workers have less money to spend,which reduces demand even more.Businesses lower their prices.that makes deflation worse. for this reason ,deflation

is even more corrosive to economic growth than inflation.