Explain in detail negative effects of inflation.

1.	Explain in detail negative effects of inflation.
Answer» Negative effects of inflation are as follows: 1. Prices of necessary goods increases: Prices of pretty much starts rising as a result necessities of life such as medical services, education etc rises which makes life of poor and middle class miserable. 2. Borrowing becomes costlier: With rise in inflation rate of interest also rises which makes borrowing costlier. Due to this producers or consumers are not to borrow more which affects the production capacity of the country. 3. Hoarding increases: Due to rise in general price level people starts hoarding the commodities to earn more profit which further rises the inflation. 4. Erosion of long term savings: Inflation erodes the savings of people. Long term savings are not able to give high returns to the people as value of money decreases.

Answer»

Negative effects of inflation are as follows:

1. Prices of necessary goods increases: Prices of pretty much starts rising as a result necessities of life such as medical services, education etc rises which makes life of poor and middle class miserable.

2. Borrowing becomes costlier: With rise in inflation rate of interest also rises which makes borrowing costlier. Due to this producers or consumers are not to borrow more which affects the production capacity of the country.

3. Hoarding increases: Due to rise in general price level people starts hoarding the commodities to earn more profit which further rises the inflation.

4. Erosion of long term savings: Inflation erodes the savings of people. Long term savings are not able to give high returns to the people as value of money decreases.

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