Answer to Question #54942 in Other Economics for Tebogo
As far as the distribution effects are concerned, inflation tends to redistribute income and wealth from creditors to debtors.
More important, however, are the economic effects, that is, those effects that impact on the performance of the economy as a whole. Inflation tends to encourage speculative activity, at the expense of productive activity, and tends to discourage saving.
Apart from its distribution and economic effects, inflation also has social and political consequences which can further undermine the performance of the economy. Price increases make people unhappy and different groups in society start blaming one another for increases in the cost of living. When rents, service charges, bus fares or taxi fares are raised, the frustration often causes social and political unrest. Inflation tends to create a climate of conflict and tension which is not conducive to economic progress.
Need a fast expert's response?Submit order
and get a quick answer at the best price
for any assignment or question with DETAILED EXPLANATIONS!