Which of the following is a danger of inflation?

Question

Quizplus · Accepted Answer

Inflation can affect the purchasing power of money, which means that prices may increase over time. This can be a problem for people who have signed long-term contracts because the prices they agreed to pay may become much higher than what they can afford. For example, a person who took out a mortgage with a fixed interest rate may struggle to make payments if prices increase significantly. Rapid price changes do not reduce uncertainty, as it becomes difficult to predict what prices will be in the future. Anticipated inflation may be greater than unanticipated inflation, meaning that people may expect prices to increase even more than they actually do, leading to hoarding and panic buying. High rates of inflation can actually increase interest rates, not reduce them, as lenders will demand higher interest rates to compensate for the reduced purchasing power of money.

Which of the Following Is a Danger of Inflation