Disadvantages of inflation Inflation is usually considered to be a problem when the inflation rate rises above 2%. High inflation creates uncertainty and can wipe away the value of savings. 1. Usually, inflation is accompanied with higher interest rates, so savers do not see their savings wiped away. Some economists even argue we should target a higher inflation rate during periods of economic stagnation.For example, the Eurozone has had a very low inflation rate in 2013-14, and this has corresponded to very weak economic growth and very high unemployment.

However, in a modern economy, this kind of hyperinflation is rare. However, there are degrees of inflation, with similar degrees of disadvantage. If one was to take a broader view of the world, then situations will appear to be relatively predictable. However, inflation can still cause problems.Inflation (CPI) above wage growth 2008-14, caused a decline in living standards – especially for workers in low-wage, zero-hour contract jobs.For me, an inflation higher than 2% is a disaster to class D family or the family that belongs to a poor family.Does consumer choice on imported goods affects its inflation?Inflation can highly influence the import and export level of a country.

When inflation is higher than nominal wages, the real incomes will fall. Inflation targeting has its benefits and there are challenges as a result. However, it still has disadvantages, which include: Fall in real wages – high inflation rates can lead to a fall in real wages. However, most Central Banks target an inflation rate of 2%, suggesting that low inflation can have various advantages to the economy. Given below are the advantages and disadvantages of inflation –As one can see from the above that inflation has advantages as well as disadvantages and it depend on the government whether it makes use of inflation for betterment of the country or it allow inflation to destroy countries growth. The major disadvantage of the inflation rate is the fact that it represents the lowering of money's value. In extreme circumstances, hyperinflation can wipe away people’s savings and cause great instability, e.g. Germany 1920s, Hungary 1940s, Zimbabwe 2000s. Disadvantages of Inflation Inflation results in higher rate of interest as central banks try to reduce money supply by increasing interest rates which in turn result in higher rate of interest on loans and since majority of people and companies takes loans during their lifetime they suffer the most because of high interest burden on their debt. Usually, higher interest rates accompany inflation so that savers do not see their money being wiped away. List of Advantages of Inflation Targeting. Inflation is a double edged sword if used judiciously it can put country to the path of prosperity and if it goes out of control then it can lead to chaos and disaster for the country. Germany 1920s, Hungary 1940s, Zimbabwe 2000s. Inflation refers to general rise in price of goods and services which in turn leads to dissatisfaction among the people of the country as nobody likes to pay more money for goods and services. The higher the inflation, the more serious the problem is. High inflation rates tend to … Click the OK button, to accept cookies on this website. The higher the inflation, the more serious the problem it is. Children playing with worthless German Marks in 1923. Balancing Predictability and Expectations Inflation targeting instills predictability. The moment one delves into the natural …

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