Inflation:

Question

Inflation:

Quizplus · Accepted Answer

Inflation raises the cost of making purchases by reducing the purchasing power of money. As the value of money decreases, people need to spend more to buy the same amount of goods and services, making them worse off financially. This can lead to a decrease in barter transactions as people are less likely to exchange goods and services without a common medium of exchange. Inflation may also encourage people to hold cash as a store of value, reducing economic activity and further exacerbating the inflation problem. While borrowers may benefit from inflation if they have fixed-rate loans, those with variable-rate loans or debts may find themselves worse off as the cost of servicing their debt increases due to inflated prices.