How does inflation affect gdp?

High inflation can have a negative effect on GDP by decreasing investment and consumer spending, decreasing purchasing power, and increasing uncertainty. As prices rise, consumers may delay purchases in the hope that prices will fall, or they may have less money to spend due to the decrease in their purchasing power. Businesses may also delay investment or expansion plans due to the uncertainty caused by high inflation. Additionally, high inflation can also lead to increased cost of production, which can further decrease GDP.

The effects of inflation are often not directly felt but are played out over a long time, especially long-term investments are vulnerable to inflation.


At Horizon65, we created a mobile app that enabled you to check the effect of inflation on your savings.

Similar Questions

Why is there no inflation?

There are several reasons why there may be no inflation in an economy. One possible reason is that there is a lack of demand for g...

Why is high inflation bad?

High inflation is bad because it can lead to a decrease in purchasing power, making it more difficult for individuals and business...

Why does inflation cause unemployment?

Inflation can cause unemployment because when prices rise, the purchasing power of consumers decreases, leading to less demand for...

Ready to get started?

Download our app and start gaining insight into your current and future finances.