Inflation Impact

Inflation has a positive impact and negative effects, depending on whether or not inflation worse. If inflation is mild, it has a positive influence in terms of stimulating the economy could be better, ie increasing the national income and get people excited to work, save and make investments. Conversely, in times of severe inflation, which in the event of uncontrolled inflation (hyperinflation), the situation became chaotic and the economy experienced sluggish economy. People are not excited about working, saving, or hold investments and production due to rapidly rising prices. The fixed income earners such as civil servants or private employees and workers will be overwhelmed and the balance to bear, so the price of their lives became increasingly fell and fell from time to time.

For people who have fixed income, inflation is very harmful. We take the example of a retired civil servant in 1990. In 1990, pension sufficient to meet the needs of life, but in the year 2003, or thirteen years later, the purchasing power of money may be only a half. This means that pension is no longer sufficient to meet the needs of life. Conversely, people who rely on income based benefits, such as businessmen, not impaired by the existence of inflation. So it is with employees who work in companies with salaries following the inflation rate.

Inflation also causes people reluctant to save because of the currency goes down. Indeed, savings earn interest, but if the inflation rate on the interest, the value of money is still declining. When people are reluctant to saving, investment and would be difficult to develop. Because, to grow the business needs of the bank funds obtained from public savings.
For people who borrow money to the bank (debtor), inflation beneficial, because at the time of debt payments to creditors, the value of money is lower than at the time of borrowing. Instead, creditors or parties who lend money will incur a loss because the value of money returns lower than at the time of borrowing.

For producers, inflation can be beneficial if the income is higher than the increase of production costs. When this happens, producers will be forced to double its production (usually happens in big business). However, when inflation led to rising production costs in the end harm producers, the producers are reluctant to continue production. Producers could cut production for a while. In fact, if not able to keep pace with inflation, the producer of business may be bankrupt (usually occurs in small businesses).

In general, inflation can result in reduced investment in the country, encouraging higher interest rates, encouraging investment is speculative, the failure of development, economic instability, balance of payments deficits, and deterioration of living and welfare.