Question

how does inflation affect economic growth and employment in the country ?

Answer 1

Inflation leads to a decrease in the amount of savings and investment in the economy. Decline in investment in turn puts a hindrance to economic growth and development of a country. In addition to this, inflation causes stagnation in the economy by lowering the demand for luxury goods, which in turn leads to shrinkage in the size of the secondary and the tertiary sectors in the market. Thus, we can say that inflation leads to a stagnation in the economy. In this regard, by stagnating the economy inflation leads to a fall in employment and a rise in unemployment in the country.