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.
ADVANTAGES
* 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.
DISADVANTAGES
* 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.
