Answer to Question #233727 in Macroeconomics for LwaziM

Question

Describe five economic effects of a continuous, moderate inflation.

Answer 1

This motivates individuals on spending money more than saving as it is important in an economy inflation.

Moderate inflation tends to enhance stability, allowing firms spend as they take risks.

Moderate inflation assists economy in expanding development projects. As less inflating may be beneficial and unavoidable in the developing countries, high inflation delays accumulation of capital, hence lowering the rate of growth.

Continuous inflation make the wages rate to fall. Inflation may act as economic lubricant, which allows price and wage adjustments to be created in the case of fluctuating demand.