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Explain how the level of inflation will influence your daily decisions. What are the implications of...

Explain how the level of inflation will influence your daily decisions. What are the implications of inflation that is unstable for an economy? Analyze the effects of a rising GDP for the different stakeholders of an economy.

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Answer #1

Inflation oftenly leads to higher prices than normal and affects the consumptions pattern which thus decreases aggregate demand if inflation reaches beyond threshold point.

Hyperinflation can makr the economic condition worse off as this narrows down purchasing power and savings and causes limited consumption which thus is severe problem. This also affects businesses and corporation as they need to pay more salaries which is indexed to inflation rate and thus affects their profitability and bottomlines.

Rising GDP can cause the aggregate demand to go further and consumption can increase lesding to higher prices and inflation. As results the consumers and corporation gets affected seriously However the government gets higher proportion of tax but at same time higher GDP implies higher export which also benefits the government balance of payments .

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