Effects of inflation are as listed below:
-Government spends a lot of money on goods and services including raw materials for carrying out their projects.
-Causes redistribution of wealth which usually favors businessmen and debtors as well as affecting the consumers, shopkeepers and fixed earners.
-Affects the wage earners in that a lag between the increased price level and the rise in wages.
-The farmers stand to gain during inflation through their agricultural products.
-The entrepreneurs obtain profits as prices rise at a faster rate than rate of production.
-affects the debtors positively in that they pay less amount of money in real terms of goods and services as they had borrowed.
-It also affects redistribution of income because factors do not rise in the same proportion.
Possible solutions of inflation are;
-Use of policies that control inflation such as fiscal policies.
-Controlling the wage growth in Kenya.
-Encouraging use of monetarism where the government control inflation through controlling money supply.
-Establishing free banking in Kenya.
-Increasing bank and Sacco's interests rates in our country.
-Increasing reserve requirements to the banks by the government thus controlling the amount of money that a given bank ought to keep on hand to cover withdrawals.
franco crick answered the question on February 27, 2018 at 09:16
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