Question

Briefly explain two unfavourable impacts of inflation.

Answer 1

1. Unjust: Inflation is unjust.' Under this, rich becomes richer and poor becomes poorer. It adversely affects the Social Welfare of the country.
2. Uncertainity: Inflation raises the level of cost of production. Labourers demand higher wages. There are fluctuations in the market forces (demand and supply). It imparts an element of uncertainty to the economy. Thus, inflation adversely affects the economic development of the country.