Subjects
Can inflation be good for the economy, or is it always bad?
Updated: 11-Apr-2025

Moderate inflation is actually healthy. It encourages people to spend now rather than delay purchases, which drives demand. Businesses earn more and invest further, creating jobs and economic growth. Central banks typically target 2-6% inflation as ideal. Too little inflation—or deflation—can stall economies, while too much erodes savings and leads to uncertainty.

Inflation also helps reduce the real value of debt, which benefits borrowers and governments. So, controlled inflation is a sign of a growing economy. It’s when it becomes unpredictable that problems arise.

Leave a Comment
Please enter your name.
Please enter a valid email address.
Please write a comment.
Comment submitted successfully!
Related questions
Q: If inflation rises suddenly, what happens to fixed pensions and savings?
Fixed pensions and savings lose value during inflation. Since these incomes don’t increase with prices, retirees and savers can buy less over time. For example, if a pension is ₹20,000/month....
Q: When inflation is high, what do central banks often do with interest rates?
They increase interest rates. When inflation rises too quickly, central banks like the RBI or Federal Reserve raise interest rates to cool down spending. Higher rates make loans more expensive....
Q: Who gains during inflation—borrowers, lenders, or both?
Borrowers usually gain during inflation. If they took a fixed-rate loan, inflation reduces the real value of the money they owe. They repay with “cheaper” money. Lenders, on the other....
Q: What happens to debt during inflation and deflation—does it grow heavier or lighter?
During inflation, debt becomes lighter in real terms because the money you repay is worth less. For example, if you borrowed ₹1 lakh, inflation reduces its value over time, making....
Q: If prices rise and wages don't, who feels the pinch most?
Lower and middle-income groups suffer most. When prices increase but wages stay flat, basic needs like food, transport, and rent become more expensive. This leads to reduced savings and financial....
Q: Which can trigger an economic spiral: prices rising too fast or falling too low?
Both can—but deflation often causes a dangerous spiral. When prices fall, businesses earn less and may cut jobs. Fewer jobs mean less income, which reduces spending further, causing more price....
Q: Which one steals value from your wallet quietly each year—inflation or deflation?
Inflation silently erodes your money’s value. Even if you earn the same salary, rising prices mean you afford less. For example, if inflation is 5%, something costing ₹100 today might....
Q: When goods get cheaper and money holds power, what economic force is in the hour?
That’s deflation. Deflation occurs when prices across the economy consistently fall. While it might seem good for consumers, it's dangerous long-term. Falling prices can lead to reduced profits for businesses,....
Q: When your money buys less than before, what’s rising behind the store?
That’s inflation at work. Inflation means the general price level of goods and services is increasing, so your money doesn’t go as far. What used to cost ₹100 may now....
Trending Questions