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Explain how the rapid rate of inflation might affect the different group of people within an economy?

Wednesday, July 25, 2012

Inflation is a rise in general level of prices of goods and services in an economy over a period of time.
As inflation has both pros and cons, it depends upon the rate of inflation. Inflation has positive impact in producers. The producers buy the raw materials at cheaper prices and when inflation is started they sell their goods in an expensive price which directly affect upon consumers. The income and earnings is same but the price of goods is increased of the consumers.
Likewise inflation affects young and old generations too. The young generations are capable of doing more work as per their requirement but the old people example-pensioners have fixed income. So it is difficult for them to fulfill their daily needs.
Similarly, when a person borrows some money for a certain period of time the interest rate is constant for him/her for that period. When inflation starts interest rate is the same so, the borrower can make more money by smaller interest but vender will be disadvantaged.
As inflation has both positive and negative aspects, it advantages to some people while some of them are disadvantaged. So, these are the affect that different groups of people feel due to rapid rate of inflation.
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