How are Inflation, recession, and high interest rates are characterized in econo

  1. Arvind Babajee profile image61
    Arvind Babajeeposted 22 months ago

    How are Inflation, recession, and high interest rates are characterized in economics events?

  2. tamarawilhite profile image91
    tamarawilhiteposted 22 months ago

    Inflation or changes in the money supply affect business. When the government is printing too much money, taking too much out of circulation or does something to devalue its currency on the world market, prices change far faster than expected and businesses scramble to survive while many don't.
    High interest rates mean the money is decreasing in value quickly, and the higher the rate of inflation, the more worthless the money becomes. This results in barter, theft, people starving because pensions and welfare are meaningless. Look at Zimbabwe, modern Venezuela and Argentina for examples of what happens.
    Recession means the economy has decreased in size for two or three quarters. Recessions normally happen periodically.
    What is dangerous is to have a recession go into a depression where the economy is contracting several percent a year, causing everyone to become poorer.
    A recession can be caused by high inflation and become a depression if it continues. A recession can be caused by a government pumping up the interest rate too high, so people can't borrow money and others spend what they have on consumables instead of saving and investing.
    The ideal case is low interest rates and an interest rate not much above the inflation rate.

 
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