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Chapter 32: Q. 19. (page 782)

Is inflation likely to be a severe problem for at least some high-income economies in the near future?

Short Answer

Expert verified

High income economies doesn't impact severely due to inflation in near future.

Step by step solution

01

Step 1. Meaning of inflation.

A general progressive increase in the prices of goods and services in an economy is known as inflation. It causes the purchasing power of money to decline.

02

Step 2. Explanation

Inflation can disrupt the economies of many countries by quickly wiping out the value of money in the country. But this inflation doesn't impact severely to high-income economies shortly because:-

a) High-income economies will index the wage levels and interest rates to inflation.

b) Their central bank can control inflation in the medium and the long term.

c) They have learned that inflation has no long-term benefits but potentially substantial long-term costs if distracts businesses from focusing on real productivity gains.

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Most popular questions from this chapter

Prepare a chart that compares India, Spain, and South Africa based on the data you find. Describe the key differences between the countries. Rank these as high-, medium-, and low-income countries, explain what is surprising or expected about this data.

What other factors, aside from labor productivity, capital investment, and technology, impact the economic growth of a country? How?

What are the major issues with regard to trade imbalances for low- and middle-income countries?

Explain why is it difficult to set aside funds for investment when you are in poverty.

Use the demand-and-supply of foreign currency graph to determine what would happen to a small, open economy that experienced capital outflows.
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