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Effects Of Inflation On Various Economic Activities Of The Country
Managerial Economics - Inflation
Effects Of Inflation On Various Economic Activities Of The Country
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Producers will earn more profit due to higher prices.
Effects Of Inflation On Various Economic
Activities Of The Country:
On Producers: Producers will earn more profit due to higher prices.
On debtors and creditors: Creditors will be happy to receive more returns on their lending.
On wage and salary earners: Wage holders will struggle to purchase the goods and services.
On fixed income group: Income is fixed but the value of the currency is falling and prices are increasing therefore it is difficult to manage the normal life. i.e. they are affected.
On investors: Investors will receive more returns on their investments.
On farmers: Farmers will suffer.
On social, moral and political effects: Due to money supply and higher the cash in hand the social, moral values are declining in the society with political disturbances.
Inflation will result if there is too much spending when compared to output. Aggregate demand is greater than aggregate supply which leads to price hike and inflation. An increase in aggregate demand when the economy is at less than full employment level will result in an increase in both price and output. If the economy is at full employment then the demand will increase which leads to inflation.
Inflation is caused by change in the supply side of the economy, it increases cost of production, prices and inflation. Initially increase in costs leads to a chain of wage increases which leads to increase in demand and cost.
On Producers: Producers will earn more profit due to higher prices.
On debtors and creditors: Creditors will be happy to receive more returns on their lending.
On wage and salary earners: Wage holders will struggle to purchase the goods and services.
On fixed income group: Income is fixed but the value of the currency is falling and prices are increasing therefore it is difficult to manage the normal life. i.e. they are affected.
On investors: Investors will receive more returns on their investments.
On farmers: Farmers will suffer.
On social, moral and political effects: Due to money supply and higher the cash in hand the social, moral values are declining in the society with political disturbances.
Demand Pull Inflation:
Inflation will result if there is too much spending when compared to output. Aggregate demand is greater than aggregate supply which leads to price hike and inflation. An increase in aggregate demand when the economy is at less than full employment level will result in an increase in both price and output. If the economy is at full employment then the demand will increase which leads to inflation.
Cost Push Inflation:
Inflation is caused by change in the supply side of the economy, it increases cost of production, prices and inflation. Initially increase in costs leads to a chain of wage increases which leads to increase in demand and cost.
Tags : Managerial Economics - Inflation
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