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Question
Explain the impact of inflation on producers in the short run.
Answer in Brief
Solution
- During inflation, the producers and businessmen gain in the short period.
- Usually the cost of production does not rise as fast as the price of their products. And so there an artificial margin of profit.
- As against this, they may be adversely affected in the long run. If the price level goes on increasing, the total consumption (demand) of their product would fall. This reduced consumption/demand will ultimately reduce their profit.
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Effects of Inflation
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