Question

How does inflation affect the proces of economy growth?

Answer 1

Heya...

Inflation effects the process of growth by the following reasons...

1 Exploitation of consumers..

In inflation the prices of the commodity shoots up and those consumers who can't afford them suffers exploited....

2 Reduction in credit creation by commercial banks...

To crubed inflation RBI sets those policies who reduced the credit creation capacity of banks so loans are not provided to people and investment stops...

3 Economic transaction disturbed..

There is a wage spiral in inflation who disturbed all the economic transactions and activities so economy get downs...