Inflation is defined as a sustained increase in the general level of prices for goods and services. This can be bad for the economy because if you increase prices without proportionally increasing income for the people would make the currency suffer from inflation. It would make the money worth less than it used to be, causing many issues with the economy, such as people and businesses becoming financially poorer.

Sometimes, the fear of increasing prices could cause people to spend more money than they usually would. The increased spending causes more inflationary problems because it increases demand while the supply is still limited, which causes prices to increase.

Increased inflation can result in a decreased savings rate due to the increased amount of spending, which is also a negative thing for the economy.

However, since inflation drives spending, it can be a positive thing for the economy, as long as it is in moderation. This is because increased spending is good for economy. This is because it drives businesses to grow, and prevents people from not spending their money due to waiting for prices of items to lower.

Rapid increases in prices can sometimes result in hoarding of basic commodities. This is sometimes due to fear of price increases, but is also sometimes due to speculators who buy large quantities of basic commodities with the expectation that they will rise in price and value.

High inflation causes each dollar you spend to be worth less and less the higher the inflation goes, causing money to be near worthless. This happened in Germany after world war 2, where they printed off billions of dollars, eventually making their money near worthless (Millions of german dollars to be equal to one US dollar), driving their economy into a terrible place to be in, showing us the negative effects of inflation.

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3 years ago

Where's all the formatting? And you were supposed to be in pairs--not groups of 4! :)