Macroeconomic Data on inflation
Discuss the various ways inflation can hinder economic activity. What are some strategies you might use in your life to deal with rising inflation? How might these strategies change if we experienced deflation?
2 to 3 paragraphs with reference.
Answer preview
Inflation reflects an increase in prices and the reduction of money purchasing power. Inflation negatively affects economic activity by lowering consumer spending, production and any activity involving the exchange of money (Mankiw, 2012). Inflation leads to an increase in interest rates eventually borrowing becomes expensive; hence a reduction in investments hindering economic activity (Ashraf, Gershman, & Howitt, 2016). Also, inflation raises the cost of living due to high prices reducing consumer spending which directly lowers consumption hence facilitating…
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