Final answer:
Inflation impacts businesses primarily by increasing prices, creating planning challenges, and potentially distracting them from productivity and service improvements.
Step-by-step explanation:
One way that inflation impacts businesses is by increasing prices. Inflation can lead to substantial planning problems for businesses and may disrupt the focus on productivity gains. A firm may temporally benefit by manipulating the timing of payments and collections; however, this often comes at the expense of improving products and services or increasing efficiency. High levels of inflation may incentivize strategies that focus on profiting from the inflationary environment instead of fostering productivity, innovation, or quality of service, which are crucial for long-term business success. Smaller economies, in particular, can experience more volatile inflation, which has the potential to significantly unsettle business operations through the international movement of goods and capital.