The question is kinda vague to answer to people who first and foremost did not understand about what really inflation is all about.
Basically, you will feel the inflation when you yourself is very mean to your expenses versus your savings. Nowadays, as you noticed, your 1000 bill when you are inside the grocery store is just like a small amount of coin that even you alone was shocked the quantity of your items being paid with your Php1000 bill on your pocket. When you are aware of that then you know what inflation is all about. It danger’s individuals’ savings. When it happened, you can start overviewing what is in store for you and your children in the future.
However, if you are more philosophical like thinking that all wages and prices increased at the same rate it would all balance out in the end right? Do you think that is possible? Of course not! When all the prices increase, of course companies will stop spending more for goods and services since they are very worried about what if these goods and services paid will continue to rise up in the next months or years? Do you think they would get back the amount they spent and even get a small percentage out from it as profit? The high inflation rate, the more possibility that it can caused high percentage of unemployment. Let me explain it further here;
The inflation will reduce the purchase power of the workers and the ordinary citizens and this will cause reduction on the demand of the market as a whole. When demand shrinks or decreases, companies will see themselves producing too much of their products while fighting the risk about what they will get in return. The products won’t be sold quickly and the inventory will rise. When that happened, many companies will start to reduce its production and then the downsizing of business will start, causing unemployment. This is difficult to see on the real world, because in countries that show a high inflation, the Government works to prevent the rise on unemployment rate. I am pretty sure that our President is working on that already as we can see the unemployment rate as of April 2018.
Unemployment slightly declined in April to 5.5%, 0.2 percentage points lower than the recorded figure in the same period last year, the PSA said in a statement, citing the results of the April 2018 Labor Force Survey.
“Employment grew partly due to increased infrastructure spending as the Department of Public Works and Highways’ road projects and rehabilitation of public school facilities are already underway nationwide,” NEDA Undersecretary Jose Miguel de la Rosa said.
Another terrible effect of inflation is when the lenders can’t be assured of getting repaid of the money owes to their borrowers. And continuing their business operations, they will now charge an exorbitant interest rates and as interest rates increase the economy grinds to a halt. So even the “good” side of inflation will turn “bad” for the economy in the long run.
I hope that this blog will help you understand about inflation and how does it generally affect into our lives.
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