Question

2. How does inflation affect the economy?​

Answer 1

When prices for energy, food, commodities, and other goods and services rise, the entire economy is affected. Rising prices, known as inflation, impact the cost of living, the cost of doing business, borrowing money, mortgages, corporate, and government bond yields, and every other facet of the economy.

Answer 2

The obvious consequence of high inflation is that it makes it more difficult for people to afford basic necessities like batteries and light bulbs. This causes families to struggle as they attempt to keep up with the price of everything from cornflakes to college tuition. With many negative effects resulting from high inflation, that doesn't automatically mean that low inflation is positive for an economy. Low inflation can have a number of negative effects on the economy.Signals economic weakness, limits impact of monetary policy, buffer for deflation is small, Puts pressure on the financial system are the affect of inflation.