It leads to uncertainties in the market, prevents businesses from making big investment decisions, may lead to unemployment, promotes hoarding as people flock to stock necessary goods at the earliest amid fears of price rise and the practice leads to more price increase, may result in imbalance in international trade as prices remain uncertain, and also impacts foreign exchange rates. Recurring upswings and downswings in an economy's real GDP over time are called: B.business cycles.
A healthy amount of inflation is said to increase and incentivize spending more; at its best, that can work in a way that the increased costs are offset by an increase in sales.An unhealthy, unmanageable level, however, is disastrous for nearly everyone.
-> government decides unemployment is too high -> expansionary fiscal policy to reduce it -> in SR, unemployment falls below 5% and inflation rises to 2%Why demand side polices struggle to deliver economic growth and lower unemployment when there is no demand deficient unemployment and the economy is at Yfe An increase in the price of oil, petrol or electricity however may lead to inflation as they contribute to the cost of production of many other goods and services.M: the money supply is the value of funds in circulation.V: The velocity of circulation is the rate at which money is spent.P: The price level ( the price level is the average price of all goods produced in the economy)Q: Real output is the level of production (or output) in the economy.What stays constant in the questions MV=PQ and what changesIf the velocity of circulation(V) and the level of output (Q) are held constant then any increase in the money supply ( M) will lead to an increase in the price level (P) so causing inflation.cost-push inflation is the result of a decrease in aggregate supply. Rate at which the general level of prices is increasing fallsSustained decrease in the general level of prices in an economyUse a price index e.g. The PPI measures price changes from the perspective of the seller and differs from the CPI which measures price changes from the perspective of the buyer. A basket of goods is defined as a constant set of consumer products and services valued on an annual basis and used to calculate the consumer price index (CPI). Action Alerts PLUS is a registered trademark of TheStreet, Inc. This phenomenon is called inflation. At a higher rate, yet still in the single digits, that's known as walking inflation. In all such variants, it is possible that the rise in the price of one component (say oil) cancels out the price decline in another (say wheat) to a certain extent. Their increased wages result in higher cost of goods and services, and
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