Study Economics notes on Inflation. Useful for revision, homework, and exam preparation in Zimbabwe.
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This is the Economics notes from 2019. It is a free notes for revision.
* 05-01-2019 (a) Explain the effect of inflation in the economy (10) Inflation rejers to a persistant and continous rise in general price level as refleeted by change in the consumer price index. The effects of inflation depend on its level, whether it is confiants, or accelerationg and whether it is anticipated or unanticipated. As a preliminary step, it is postulated that, The higher the rate of Inflation the greater the economic costHigh rates of Inflation mean that people and Companies may lose considerable purchasing power of they keep money lying idle and not earning intrest. Households and firms are then forced to spend more monay time transpercing money from one type of account to another or putting cash into an account, to maximise the intrest paid, and Economist regers to this as shoe leather costs. Futhermore, Inflation redistributes income away from those on fixed incomes and those in a weak bargaining position to those who can use use their economic power to gain large pay, rent or profit increases, for instance, weekly unionised workers who cannot gain full compansation for price rises will lose at the expense of strongly unionised workes who can do so. Mareover, it is hypothesised that, Inflation increases scanned by Camscanner