Macroeconomics - Inflation

what is inflation?

increase in general price level of goods and services

what are the causes of inflation?

1. demand-pull inflation

2. cost-push inflation

what are the advantages of inflation?

1. Higher wages for workers

2. firms encouraged to increase output

3. can keep unemployment low in a recession

4. improvement of government finances

what are the disadvantages of inflation?

1. lower purchasing power

2. lower export competitiveness

3. fall in value of savings

what is deflation

decrease in general price level