ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Therefore, inflation leads to reduction in export because of goods and services that prove more costly in the international market. So, if the price of domestic goods increases, they become more expensive for foreign buyers.

Detailed explanation-2: -With imported inflation, production costs are higher for companies. These companies most often reflect this increase in the selling price of the goods and services sold. As a result, prices within the country rise. Imported inflation causes inflation.

Detailed explanation-3: -In theoretical sense, export and inflation have inverse relation with each other. Inflation leads to costlier goods and services in the international market. Export of goods and services will increase only if demand for domestic export in foreign countries is inelastic (Fleming, 1962; Mundell, 1963).

Detailed explanation-4: -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-5: -When the inflation rate is high, export activities will decrease, and vice versa when inflation falls, export activities will increase. At the time of inflation, the competitiveness of export goods decreases. Reduced competitiveness occurs because the price of export goods is getting more expensive.