5 % (reference the lecture notes). In fact, North America has suffered from a terrible recession as a result. Although many believe, that the recession was not due to only inflation but instead, it was a combination of both high inflation and high unemployment rates. Therefore, low inflation can help avoid recession and prevent a sudden rise in unemployment respectively.
Another disadvantage that inflation brings is that it greatly discourages investment by discouraging firms from making long term and short term in some cases of investments. Companies and business organizations usually hesitate to make well-founded decisions because they are uncertain about future changes that would reflect on their revenues and profits. In addition to the ambiguity that inflation causes, it also puts the country at a competitive disadvantage since there will be a fall in exports. Moreover, when cost-push inflation is high and relatively above the income growth, the incomes falls dramatically and inevitably according to Scotia itrade (2011) . Similarly, in the case where inflation rate is higher than the interest rates, people's savings are deeply affected. The value of money and living standards are evidently reduced. Hence, inflation can cause a disorder in terms of both, the economy and the society. Having discussed the drawbacks and disadvantages of inflation, few benefits, however, can be reasonably outlined.
Some positive effects of inflation are centralized about the fact that house prices can rise again after an unfavorable fall and the buying power can gradually wear off. In reality, "injecting the economy with a healthy dose of inflation" (reference 2) can boom the market therefore; the country will have a stronger economy. Many economists believe that a moderate inflation can reduce unemployment. This will be further discussed later in the essay. Unemployment is a huge problem that economist face after the economic slowdown that effected almost the entire world.
