Question

Explain two reasons why governments aim for low and stable inflation

Answer 1

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A low and stable rate of inflation is desired by government because rising demand and lack of supply causes rise in price. This would cause demand to fall eventually at a time in future causing the producers to produce less in the expectation of less profit. As a result, economic growth would be stunned,

Answer 2

A low and stable rate of inflation is desired by government because rising demand and lack of supply causes rise in price. This would cause demand to fall eventually at a time in future causing the producers to produce less in the expectation of less profit. As a result, economic growth would be stunned, i