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 Form 4 online business studies lessons on inflation

Negative effects of inflation in an economy

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Answer Text:
Negative effects of inflation in an economy:
-it weakens value of local currency thus money fails as a store of value.
-leads to decline in the standards of living for people earning fixed income due to fail in money value.
-it discourages savings,investments and capital accumulation as
people fear the loss of value of money
-leads to fall in investment and employment levels as profit margins reduce.
-leads to income being redistributed in the economy.
-It leads to general increase in the industrial unrest as employees demand for
increased wages and salaries.