1. One effect of inflation on consumers is that it reduces the purchasing power of their money. This means that the same amount of money will buy fewer goods and services, leading to a decrease in the standard of living for consumers.
2. One type of inflation is cost-push inflation, which occurs when the costs of production increase and businesses pass those costs on to consumers in the form of higher prices.
3. To reduce inflation, a central bank could implement a contractionary monetary policy, such as increasing interest rates. This would slow down borrowing and spending, leading to a decrease in demand and ultimately reducing inflation.
Inflation and unemployment are two of the biggest problems for any global of market economics.
Answer the following questions:
1. State an effect of Inflation on consumers.
2. Name one type of Inflation.
3. Given all things being equal, suggest a monetary policy measure that can reduce both Inflation.
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1 answer