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Question
Explain creeping inflation impact on the economy?
Solution
- Creeping inflation, described as a slow and gradual increase in prices (usually 1-3% per year), has a positive and negative impact on the economy. On the plus side, rising inflation can boost spending and investment since consumers and businesses expect prices to grow gradually, making it more appealing to purchase goods and services or invest sooner rather than later.
- However, creeping inflation might have certain negative consequences. If it persists for an extended period of time, it has the potential to reduce consumers' purchasing power, particularly for those on fixed incomes, who may find it increasingly difficult to maintain their living standards.
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RELATED QUESTIONS
'A state of running or hyperinflation in any economy is very harmful for production'. Justify the statement with two reasons.
What is walking inflation?
What is the meaning of creeping inflation?
Study the relationship in the first pair of words and complete the second pair.
- Creeping inflation: The rate of inflation is 1% to 2% per annum.
- Running inflation: The rate of inflation is ______ per annum.
______ refers to a situation where prices rises very slowly.
______ is beneficial for growth.
Match the following and select the correct option:
| Column A | Column B | ||
| (i) | Inflation caused by demand pull factors | A. | Hyper inflation |
| (ii) | Inflation caused by cost push factors | B. | Creeping inflation |
| (iii) | First stage of inflation | C. | Cost push inflation inflation |
| (iv) | Last stage of inflation | D. | Demand pull inflation |
When the general price level increases by 10% to 20% per annum, then it will be called:
Read the following statement carefully and choose the correct alternative given below:
Assertion (A): Value of money falls during inflation.
Reason (R): Government employees are compensated for inflation by raising their dearness allowance.
What is meant by running inflation?
