Inflation affects how we buy things and how the economy grows in several ways:
Buying Power: When prices go up, people often feel like they have less money to spend. For example, if inflation is 5%, $100 won’t buy as much as it used to. This can make people cut back on how much they spend.
Saving or Spending: When inflation is high, people might decide to spend their money right away instead of saving it. If they think prices will keep rising, they may want to buy things now before they cost even more.
Interest Rates: Central banks, which help control the economy, might raise interest rates to fight inflation. This means borrowing money becomes more expensive. Higher rates can make people less likely to buy big items, which can slow down economic growth.
Overall, inflation changes how people use their money, which in turn affects how the economy grows and stays stable.
Inflation affects how we buy things and how the economy grows in several ways:
Buying Power: When prices go up, people often feel like they have less money to spend. For example, if inflation is 5%, $100 won’t buy as much as it used to. This can make people cut back on how much they spend.
Saving or Spending: When inflation is high, people might decide to spend their money right away instead of saving it. If they think prices will keep rising, they may want to buy things now before they cost even more.
Interest Rates: Central banks, which help control the economy, might raise interest rates to fight inflation. This means borrowing money becomes more expensive. Higher rates can make people less likely to buy big items, which can slow down economic growth.
Overall, inflation changes how people use their money, which in turn affects how the economy grows and stays stable.