Question

what are the benefits of a small amount of inflation?instructions: in order to receive full credit, you must make a selection for each option. for correct answer(s), click the box once to place a check mark. for incorrect answer(s), click the option twice to empty the box.

Answer 1

The economic effects of inflation are mainly negative, but there are a few benefits. First, inflation at a low rate is better than deflation. Second, ordinary people can benefit from inflation through redistributions of purchasing power when borrowing at a fixed interest rate.

Step-by-step explanation:

Although the economic effects of inflation are primarily negative, there are two countervailing points worth noting. First, the impact of inflation will differ according to its rate. Hyperinflation can be detrimental to an economy and society, while a low inflation rate of 2-4% is far from a national crisis.

Secondly, ordinary people can sometimes benefit from inflation through unintended redistributions of purchasing power. For example, someone who borrows money at a fixed interest rate can benefit if inflation rises, as the real interest rate on the loan decreases. This is the flip side of an investor receiving a fixed interest rate, who suffers from inflation.