Here are some of the common effects of inflation:
- Reduction of purchasing power - Inflation is a decrease in the
purchasing power of currency due to a rise in prices across the
economy.
- Increase in expenses and decrease in savings - since due to
inflation, purchasing power decreases, it follows increase in
expenses and decrease in savings of households.
- Reduces Employment and Growth - there is less job creation and
hence more unemployment during inflation period.
- Weakening of domestic currency - the country with the higher
inflation rate generally finds its currency weakening.
- It helps debtors and harms lenders - Classically, inflation
works in favor of people who borrow money.
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