+ Inflation due to economic growth shows that an economy is expanding.
+ Demand pull inflation attracts investment from firms enable to supply for the
excesive demand.
+ Better than deflation
- Increases the price of exports, exporting becomes less competetive.(reducing
GDP)
- Increases the ability to import (reducing GDP)
- Inflation stimulates a viscious cycle of inflation (costs UP, prices UP, wages UP)
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