Benefits / Advantages of Moderate Inflation

Benefits / Advantages of Moderate Inflation

In spite of its many drawbacks, inflation, it must be admitted, inflation is not totally undesirable. A moderate rate of inflation (for example 2 %) has some advantages over deflation and stagnant inflation rates.

Incentive for production: When there is inflation, causing large circulation of money it naturally creates in people an incentive for production. As a matter of fact, many large and small scale industrial units came into being in our own country due to a great rise in the price of goods.

Widen scope for employment: Naturally, such activities widen the scope for employment and the distress caused by unemployment or under-employment is partially removed.

Stimulus to fuller utilization of resources: In a country with undeveloped economy, moderate inflation thus gives stimulus to fuller utilization of its resources in men and materials accelerate its economic growth and prosperity and raise the standard of living for all classes of people.