Friday 21 December 2018

Impact of Inflation – Advantages & disadvantages

Impact of Inflation

As has been discuss previously in inflation; Definition, components, levels and methods of Measurement that in general inflation can be define. As the increase in the level of prices of goods and Services generally and continuously for a certain time.

The Impact of Inflation Against the Community Economic Activities:

Positively Impact

  1. Circulation/turnaround stuff faster.

  2. Production of goods increased, due to the advantage of employers.

  3. Employment opportunities increased due to additional investment.

  4. Nominal Income increased, but diminished, due to the increase in real income.

Negative Impacts

  1. The price of goods and services to rise.

  2. Value and trust of money will go down or reduce.

  3. The Cause of action of speculation.

  4. Many of the construction projects stalled or abandon.

Awareness of saving communities dwindling. Parties who Benefit and who suffered loss due to the occurrence of Inflation.


    1. Entrepreneurs, who at the time before the onset of inflation, have had the stock/inventory of production of goods that are ready to be sold in large numbers.

    2. The traders, which with the onset of inflation using the opportunity to play the price of goods. How used is by raising the price, because the want to get profit/great benefits.

    3. The speculators, that is, persons or entities that hold the speculation, with the way the hoard things as many prior to inflation and resell it at a time when inflation occurs, so that the uptrend greatly benefit them.

  • The borrowers, because the loan had been taken before the price of goods is rising, so that its real value is higher than after inflation, but the borrower pays back fixed in accordance with the agreements made before the inflation occurred.

For example, the MORTGAGE credit takers BTN before the inflation that resulted in the price of building materials and home MORTGAGES is rising, while the number of BTN installments that must be paid to the BTN is still not taking part is raise.


  • The consumer, because they have to pay more. So that the items are retrieve fewer when compare with before the onset of inflation.

  • Fixed incomes, because with a steady income, a rise in the price of goods and services. Resulting in the amount of goods and services that can be purchase to become a little more. So that real income/real decreases. While the increase in earnings or income in the event of inflation is hard to expect.

  • The contractor or contractors, because of the additional cost of having to issue in order to close the expenditure-expenditure arising from the occurrence of inflation and lead to reduced profits from the tenants.

  • The lenders/creditors, because the real value of the loans have been granted becomes smaller as a result of the onset of inflation. For example, before inflation, loan of USD 500,000.00 = 25 grams of gold, after inflation = 20 grams of gold.

  • Depositors, because at a time when inflation is interest earned from savings felt smaller when compared to the price increases that occurred. In addition, due to the rise in the price of goods and services, the value of the money that is saved into lower/down, compared to inflation before they occur.

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