Inflation is the decline of purchasing power of a given currency over time. A quantitative estimate of the rate at which the decline in purchasing power occurs can be reflected in the increase of an average price level of a basket of selected goods and services

in an economy over some period of time.

The rise in the general level of prices, often expressed as a percentage, means that a unit of currency effectively buys less than it did in prior periods.


* Moderate inflation enables economic growth.

* Moderate inflation allows adjustment of real wages. *Moderate inflation allows adjustment of prices.

* Inflation is better than deflation – which can cause recession.


* Create uncertainty and lower investment.

* High inflation often leads to lower growth and less stability.

* Reduces international competitiveness.

* Reducing inflation can lead to recession.

* Fall in value of savings.

* If wages don’t keep up – lower real wages.

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