ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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inflation encourages consumers to buy goods made in other countries rather than imports
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Inflation increases the rate of savings
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Inflation means a recession is just about to start
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Inflation leads to uncertainty and makes investment more risky
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Detailed explanation-1: -According to many analysts, uncertainty about future inflation rises as inflation rises. As a result, these analysts argue that the Federal Reserve could reduce inflation uncertainty by reducing inflation.
Detailed explanation-2: -By using two different methodologies the Granger causality test and GARCH model Nas and Perry (2000) examine the relation between inflation and inflation uncertainty, and their empirical findings support the evidence, that the increasing in inflation rates causes increases inflation uncertainty.
Detailed explanation-3: -Inflation risk, also referred to as purchasing power risk, is the risk that inflation will undermine the real value of cash flows made from an investment. Inflation risk can be seen clearly with fixed-income investments.
Detailed explanation-4: -Disproportionately Impacts Low-Income Households. Raises Cost Of Living. Raises Interest Rates. Hurts The Growth Of Stocks And Bonds.