Answer to Question #81447 in Macroeconomics for Sellah Markach

Question

Do you think that inflation imposes a net cost to the economy after considering the gains and loss?

Answer 1

Inflation can be considered as an additional tax, paid an economic agent. This tax is realized in devaluation of a national currency and growing prices. On the other hand, this tax is not gathered by a government and directed on social needs. That is why inflation can be really considered as a net cost for a national economy. In th end, it is realized in devaluation of a national currency, growing prices and finally recession.