Why does inflation cause unemployment?

Inflation can cause unemployment because when prices rise, the purchasing power of consumers decreases, leading to less demand for goods and services. As a result, companies may cut back on production and lay off workers to reduce costs. Additionally, inflation can lead to higher interest rates, making it more expensive for businesses to borrow money for expansion and hiring. This can also lead to less investment and slower economic growth. In the long run, high inflation can also reduce economic efficiency and discourage foreign investment.

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.

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