Final answer:
Functionalism sees inflation as part of the natural market cycle, where economies experience fluctuations in supply and demand. Governments, however, tend to intervene, adjusting interest rates to prevent severe economic downturns, which deviates from a pure functionalist laissez-faire approach.
Step-by-step explanation:
From the functionalist perspective, inflation is seen as a natural occurrence in the market's cycle of supply and demand. Functionalists recognize that markets produce and distribute goods efficiently, but sometimes produce a surplus, leading to inflation — a decrease in purchasing power of money. This can be followed by a recession, defined by two or more consecutive quarters of economic decline. To prevent the severe impact of economic downturns, such as the Great Recession, governments may intervene by adjusting interest rates to promote lending and spending, countering what a pure functionalist approach might entail, which would suggest allowing economic cycles to self-correct without interference.
In illustrating the functionalist approach, it is critical to understand the need for a healthy economy and the distribution of goods and services, which are essential to the health of a nation. However, the functionalist perspective also acknowledges potential dysfunctions, such as those caused by failed adaptations to changing social conditions, which can lead to economic crises. An example of such a dysfunction was the bursting of the housing bubble, attributed to risky lending and an underregulated financial market.
While functionalism relates to inflation by viewing it as part of natural economic cycles, these cycles are inevitably influenced by government actions in modern economies to mitigate the risks associated with severe recessions or depression.