Question

write any four effect of inflation

Answer 1

1. Erodes Purchasing Power

This first effect of inflation is really just a different way of stating what it is. Inflation is a decrease in the purchasing power of currency due to a rise in prices across the economy

2. Encourages Spending and Investing

A predictable response to declining purchasing power is to buy now, rather than later. Cash will only lose value, so it is better to get your shopping out of the way and stock up on things that probably won't lose value. 

3. Causes More Inflation

Unfortunately, the urge to spend and invest in the face of inflation tends to boost inflation, in turn, creating a potentially catastrophic feedback loop. As people and businesses spend more quickly in an effort to reduce the time they hold their depreciating currency, the economy finds itself awash in cash no one particularly wants

4. Raises the Cost of Borrowing

As these examples of hyperinflation show, states have a powerful incentive to keep price rises in check. For the past century in the U.S., the approach has been to manage inflation using monetary policy. To do so, the Federal Reserve (the U.S. central bank) relies on the relationship between inflation and interest rates