INFLATION: Good for a Growing Economy Team 10 07927802 Avinav Goel 07927838 Varghese Eappen 2. A little inflation can be good for the economy as it can encourage shoppers to buy sooner. In spite of what people such as SDD say, a steady rate of inflation has no effect on debt. Although inflation is sometimes considered good and sometimes bad, for most of us, it is almost always the latter. High inflation is very bad so is deflation. Is inflation good or bad? To reduce inflation and keep inflation within the target, the B of E will have to increase interest rates; this causes problems because AD will fall causing lower growth. There used to be an expression, “A little inflation is a good thing”. For example, in the late 1980s, the UK experienced demand-pull inflation from rapid economic growth – but this led to higher interest rates and the boom turning to bust. There are many studies about the pros and cons on different target inflation rates but a main argument is that inflation drives demand of goods. Like food, the right amount of inflation is good; too little or too much is bad. Inflation - Good or Bad? Inflation will always reduce the value of money, unless interest rates are higher than inflation. By virtue of the fact that it reduces your money’s spending power, it would be wise to make efforts to protect your money from this phenomenon. Inflation is both good and bad for a couple of reasons. Inflation means the economy is growing strong and prices are going up. Inflation, if it’s managed, is not always bad. When inflation is too high of course, it is not good for the economy or individuals. Inflation forces people to purchase today because they fear the money will have less value tomorrow. The Final Verdict on the Pros and Cons of Inflation. 1. Too much inflation is generally considered bad for an economy, while too little inflation is also considered harmful. Low inflation is good around 2% at least that is what the Fed thinks. A steady inflation rate is included in the interest rates and so the amount paid back is not reduce or the debt reneged on in any way: Inflation is both good and bad.

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