High Inflation
High inflation is a phenomenon in which the prices of goods and services increase at an unsustainable rate over a period of time. It typically occurs when there is too much money chasing too few goods and services, creating an imbalance between demand and supply. This can lead to rapid economic growth, but it also has some major drawbacks including:
-Erratic Price Changes: High inflation can cause erratic price changes for goods and services on a day-to-day basis, as well as over longer periods of time. This makes it difficult for people to plan their financial futures since they cannot predict what will happen with prices from one week or month to the next.
-Loss Of Purchasing Power: If prices are increasing faster than wages, then individuals may find themselves unable to purchase the same amount of goods and services that they could before. As such, their purchasing power may be eroded by high inflation rates because their income does not keep up with rising costs.
-Reduced Savings Potential: Since savings accounts generally pay out low interest rates compared to inflation levels, savers may face reduced returns on investments due to high inflation eroding away at the value of their money over time.
-Currency Devaluation: When there is persistent above average increases in consumer prices (inflation), confidence in currency depreciates rapidly leading to devaluation thus reducing its exchange rate against other currencies further impacting international trade & investment activities among countries using different currencies leading towards recessionary effects within those economies
