Question

Inflation has increased at a rapid rate over the past year. Prices are going up everywhere. As the Economic Consultant of the president, your task is to give or make recommendations to the President on specific physical policy to help slow down inflation or the velocity of money in the economy. What should you propose? Explain

Answer 1

Elevated inflation discourages saving, since it erodes the purchasing power of the savings over time. That prospect can encourage consumers to spend and businesses to invest. As a result, unemployment often declines at first as inflation climbs.