• Inflation creates a sellers’ market in which sellers have command on prices because of excessive demand. In such market anything can be sold. Since the producer’s interest is only higher profits, they will not care for the quality.
• Inflation disrupts the smooth working of the price mechanism, creates rigidities and results in wrong allocation of resources.
• Inflation reducers saving and capital accumulation.
• Inflation does not only reduce domestic saving but also discourages the inflow of foreign capital in the country.
• Inflation reduces the volumes of production because capital accumulation has slowed down and business uncertainty discourages entrepreneurs from taking business risks in production.
• Inflation affects the pattern of production by diverting the resources from the production of essential goods to that of non-essential goods.
• Inflation is socially unjust and unequitable because it leads to redistribution of income and wealth in favor of the wealthy.
skilled writter answered the question on May 1, 2018 at 16:22
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