 Reduces purchasing power: If salary stays the same and inflation is occurring individuals will get less for there money.  Reduced value of savings.

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Presentation transcript:

 Reduces purchasing power: If salary stays the same and inflation is occurring individuals will get less for there money.  Reduced value of savings if Inflation is greater than the interest rate.  Increased business costs because the price of raw materials or insurance increase. Increasing profits by increasing price is not possible in a competitive market place.

 Workers will want higher wages during times of high inflation  If inflation is changing rapidly then businesses will have to change prices and menus frequently.  Shoe leather costs if inflation. This means that if prices are changing frequently then then customers will have to search out the lowest prices.

 Question 1 on page 152

 Many pensions are index linked to the RPI

 Inflation will make domestic products expensive and exports will suffer causing an increase in Balance of Payments deficit

 Economics in practice  Keywords