ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -During inflationary periods, prices are higher, and it is more expensive to incur debt. For these two reasons, companies often sell fewer products and the economy slows. This may lead to diminished corporate profits, layoffs, and pressures on households. The end result of this cycle of events is a potential recession.

Detailed explanation-2: -In an inflationary environment, unevenly rising prices inevitably reduce the purchasing power of some consumers, and this erosion of real income is the single biggest cost of inflation. Inflation can also distort purchasing power over time for recipients and payers of fixed interest rates.

Detailed explanation-3: -Walking Inflation It is harmful to the economy because it heats up economic growth too quickly. People start to buy more than they need in order to avoid tomorrow’s much higher prices. This increased buying drives demand even further, and suppliers often can’t keep up.

Detailed explanation-4: -A moderate amount of inflation is generally considered to be a sign of a healthy economy, because as the economy grows, demand for stuff increases. This increase in demand pushes prices a little higher as suppliers try to create more of the thing that consumers and businesses want to buy.