The Negative and positive of Inflation in Economy

Good evening house, hope your day went well, once again you are welcome to my blog.

Source

Inflation is the persistent increase in price of goods and services over time.
Inflation can have both positive and negative effect on the economy.

The positive effects are:

1. Higher profit:

The Business men and women stand a chance of getting more profit. Inflation, usually, benefits the producers of products. They experience better profits since they can sell their products at higher prices.

2. Shareholders

The stand to gain more dividend because when the prices of goods increase in the market, the company will likewise increase the dividend of shares. During that period, price
per share will increase that if any shareholder wants to sell shares, will stand to gain.

3. There will be increased in production.

Once the producers receive the right investment, they create more goods and services. Hence, inflation leads to an increase in production of products/services.

4 High rate of employment opportunities:

Since production increases, there is an increased demand for the various factors of production, including manpower. Therefore, employment and income increases during inflation.


Source
While the following are the negative effect of inflation on economy:

1. Fixed income earners

They will stand to lose because as the prices of goods and services increase in the market, the income are fixed.

2. Consumers

The tend to decrease their purchasing power because going by the law the law of demand and supply, the higher the price, the lower the quantity demanded and the lower the price, the higher the quantity demanded.

3. Inflation affects the living of people

Because most people are of low income earners and the can't afford some commodities when the prices are high.

4. There will be inequality in income distribution.

During inflation, businessmen and entrepreneurs experience an increase in profits. On the other hand, people belonging to the fixed-income groups experience a decline in their real income. Hence, the inequality in income distribution becomes acute during this period.

5. Inflation affects government planning of development:

During inflation, the prices of goods, raw materials, and factor services increase. Therefore, the Government has to spend more money to complete any investment project taken up during the planning period.

Conclusion

If the Government fails to raise more financial resources through savings or taxation, then it upsets the entire planning process.

Thanks for visiting my blog, and have a lovely night rest.

H2
H3
H4
3 columns
2 columns
1 column
2 Comments
Ecency