February 26, 2017

Homework Help: eco

Posted by anonymous on Sunday, July 8, 2007 at 5:27pm.

why is inflation so widely feared?

During inflationary times, prices increase, but wages often don't go up as fast as prices.

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Inflation is a major disadvantage to certain groups.

Keep in mind the major element in the definition of inflation is rising prices.

One group that it harms are those who are on fixed incomes. Inflation means that the prices that people pay for necessities such as rent, ford clothing and in today's time gasoline goes up. At the same time their fixed income(money) remains the same. These people, therefore, find that they can buy fewer goods and services with the money that they receive.

Another group that is harmed are those who are creditors. These are the peopleor institutions to whom money is owed. When the debts are paid back they are paid back with money that is worth less (cheap money).

There are other effects of inflation such as rising interest rates and the stock and bond markets,

Bear in mind that some groups benefit from the rise of prices.

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