Question

What are the costs of inflation? Which of these costs do you think are most important for the U5. economy?

Answer 1

Explanation:

Menu cost, shoe leather cost, losing money and wealth redistribution from creditors to debtors through inflation.

Most people cut down their spending when they are not making enough money or when there is continuous increase in price, during this period people are mindful of what they spend money on, this will lead to lowered economic growth over a long period of time.

The most important will be the effect of money losing it's value, the fact that money loses its purchasing power which will lead to decrease in demand for goods and services as well as lack of savings will increase the bottleneck on welfare services as people will rely more on them, this will hurt US the most.