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PROBLEMS WITH INFLATION, Depends on factors - Coggle Diagram
PROBLEMS WITH INFLATION
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Efficiency effects
firms may delay investment if they are unsure of the price at which they will buy inputs at or sell their goods
Show leather cost
Households and firms will have to search for good returns from their savings to protect their real earnings and to search for the cheapest suppliers
Menu cost
the costs associated with changing the prices in publicity material, displays and slot machines
Employees expectations
if employees expect high inflation, they are likely to demand high wages (wage/price spiral)
Uncompetitiveness abroad
(if UK inflation is higher than overseas and the exchange rate does not fall to compensate) it may worsen the balance of payments position
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