Advantages and Disadvantages of Inflation

HideShow resource information
  • Created by: Em
  • Created on: 30-05-16 11:43

Advantages and Disadvantages of Inflation

Advantages

  • Investors benefit form an increase in the value of stocks and commodities such as oil and gas
  • People get more money due to an increase in wages (wages increase with inflation)
  • Banks get more money (more people are able to deposit more in banks because of the rise in wages)
  • It is easier for borrowers to borrow money (banks are more willing to give loans at good rates because they have lots of money)

Disadvantages

  • Retired people suffer because retiree benefits don't rise with inflation, but the cost of goods/services do
  • First time home buyers will have to pay more for houses (home prices rise and there are high interest/mortgage rates)
  • Currency depreciates (money loses its value because there is more of it in circulation)

Evaluation

Inflation is often seen as a bad thing however there are some advantages and some people benefit. Inflation needs to be regulated by increasing or decreasing interest rates (monetary policy) and controlling prices/wages.

Comments

No comments have yet been made

Similar Economics resources:

See all Economics resources »See all Inflation resources »