Question
Explain five negative effects of inflation in an economy.
Answer
- Erosion of people's purchasing power.
- Lowering citizens' standards of living since the cost of living becomes higher.
- Increase in general prices.
- Loss of confidence in the local currency by the citizens.
- Emergence of black markets.
- Increase in interest rates.
- Discourages personal savings.
- May lead to loss of value in local currency.
- Lowering citizens' standards of living since the cost of living becomes higher.
- Increase in general prices.
- Loss of confidence in the local currency by the citizens.
- Emergence of black markets.
- Increase in interest rates.
- Discourages personal savings.
- May lead to loss of value in local currency.
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