Question

Inflation has been moderate in some industrialized countries since the 1970s because:________

Answer 1

Inflation has been moderate in some industrialized countries since the 1970s because economists have started using more sophisticated monetary policy.

When prices increase gradually over a certain period of time, this is referred to as moderate inflation, gentle inflation, or creeping inflation. It increases customer expectations that product and service prices will climb more, which ultimately increases demand. In order to avoid the future price increases, consumers will make immediate purchases. In this sense, moderate inflation promotes economic growth.

In this instance, a nation's inflation rate climbs gradually but steadily over time, with the consequence of inflation not being obvious for a long time. Inflation never exceeds 3% during the course of a year.

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