Buy custom effects of inflation
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As they become less valuable, people rush to sell them, further depreciating their value. As their value becomes lower, the government is forced to offer higher interest rates to sell them at all.
- Inflation may also damage business confidence because of fears about the future impact on costs. This may reduce levels of investment...
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This may reduce levels of investment.
- Tax thresholds often do not increase in line with inflation. If employees gain a pay increase to match inflation then they are not better off in real terms. However, with higher nominal pay individuals may enter a higher tax band and therefore be worse off. This is called fiscal drag...
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