Inflation: Advantages and Disadvantages

March 2nd, 2008 | inflation -

Readers Question: what are the advantages and disadvantages of inflation???

The advantages of inflation:

1. Deflation is very harmful. For example, the Japanese economy has suffered lower growth because of deflation. When prices are falling people are reluctant to spend money because they are concerned that prices will be cheaper in the future, therefore, they keep delaying purchases. There are many more cost of deflation in this essay on

is Inflation beneficial?

Disadvantages of Inflation.

Inflation is considered to be a problem when the inflation rate rises above 2%. The higher the inflation, the more serious the problem is.

In a modern economy, the Government are most concerned about the destabilising impact of inflation.
Inflationary growth tends to be unsustainable leading to a damaging period of boom and bust economic cycles.
Inflation tends to discourage investment and long term economic growth.
See also: Costs of Inflation

7 comments ↓

#1 SAMEER on 05.03.08 at 12:38 pm: I AM SAMEER WE CAN SAY THAT INFLATION IS NOT HELP FULL TO OUR COUNTARY /
#2 Rajesh Mulchandani on 01.04.09 at 5:50 pm: Hello im Rajesh Mulchandani according to me it is very dangerous rise in infltion mostly in developing countries and when there is crisis picture of economy of that particular contry in opposite of that that very same country face the deflation and unemployment.
#3 anuj anand on 04.01.09 at 11:17 pm: i would disagree on this point because inflation is still better than deflation due to people try to buy goods at the prevailing price ,as they know that there would be a increase in price in the near future on the contrary while deflation people wait for the product to become more cheaper ,which results into the blockage of stock.making the condition worse thus from the two devils inflation is a better option .!
#4 GIMUI DAN on 12.17.09 at 2:53 pm: ACCODING TO ME,
INGFLTION IS A DANGERIOUS OBSTACLE TO THE POOR. IT AFFECTS THE POOR BADLY AND PUSHES THEM INTO THE POVERTY TRAP. THUS INFLATION IS AS DANGERIOUS AS A MASSIVE WEAPON
#5 varma on 12.19.09 at 2:35 pm: plz mail me about inflation, deflation, indusrial analysis on iron n steel .
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#6 marwan on 03.03.10 at 3:13 pm: what i saw from the feedback that alot of people prefer inflation. the question am asking now is; why do most people prefer inflation to deflation ? is it because such guys are business owrners and they don’t to earn alittle or what ? what about poor people. how can they make ends meet? think properly, think widely, think about the poor first. then i am sure, you are going to change your mind.
#7 Nalin on 03.16.10 at 9:29 am: My feeling is that depending on the nature of the economy of a country, inflation can either be good or bad. But in general, mild inflation (anticipated level) is encouraging producers while high level of inflation will put everybody such as individuals, lenders, bussinessmen, government, economies, etc into a bad shape.