Question

What is the risk of creating inflationary pressures in the economy by following the average of model predictions?

Answer 1

Inflationary pressures in an economy refer to the demand and supply forces that lead to a sustained increase in goods and services' prices. The risk of inflationary pressures following the average of model predictions is that it lowers the consumers' power to buy and increases the cost of borrowing.

Explanation:

The overall effect of inflationary pressures in an economy is the reduction of a county's economic activity. An increase in the cost of credit leads to the level of investments decreasing significantly. Consequently, unemployment levels of the country rise hence a reduction in the consumer ability to buy. Inflation also lowers economic growth and development as both the private and public sectors are affected.