Editing Inflation (section)

=== Negative ===
[[File:NY near Times Square pizza shop inflation sign 2.jpg|thumb|New York City Pizza shop where prices were changed from the fixed sign price of "$0.99" to the new price of "$1.50". During periods of high and rising inflation, prices may rise faster than a fixed-price sign is able to accommodate.]]
High or unpredictable inflation rates are regarded as harmful to an overall economy. They add inefficiencies in the market and make it difficult for companies to budget or plan long-term. Inflation can act as a drag on productivity as companies are forced to shift resources away from products and services to focus on profit and losses from currency inflation.<ref name="Taylor" /> Uncertainty about the future purchasing power of money discourages investment and saving.<ref>{{cite journal | title=Personal Savings and Anticipated Inflation | journal=The Economic Journal | last=Bulkley | first=George | volume=91 | issue=361 |date=March 1981| pages=124–135 | doi=10.2307/2231702 | jstor=2231702}}</ref> Inflation hurts asset prices such as stock performance in the short-run, as it erodes non-energy corporates' profit margins and leads to central banks' policy tightening measures.<ref>{{Cite web |title=Stock Returns and Inflation Redux: An Explanation from Monetary Policy in Advanced and Emerging Markets |url=https://www.imf.org/en/Publications/WP/Issues/2021/08/20/Stock-Returns-and-Inflation-Redux-An-Explanation-from-Monetary-Policy-in-Advanced-and-463391 |access-date=2023-01-08 |website=IMF |language=en |archive-date=January 8, 2023 |archive-url=https://web.archive.org/web/20230108213505/https://www.imf.org/en/Publications/WP/Issues/2021/08/20/Stock-Returns-and-Inflation-Redux-An-Explanation-from-Monetary-Policy-in-Advanced-and-463391 |url-status=live }}</ref> Inflation can also impose hidden tax increases. For instance, inflated earnings push taxpayers into higher income tax rates unless the tax brackets are indexed to inflation.

With high inflation, purchasing power is redistributed from those on fixed nominal incomes, such as some pensioners whose pensions are not indexed to the price level, towards those with variable incomes whose earnings may better keep pace with the inflation.<ref name=Taylor/> This redistribution of purchasing power will also occur between international trading partners. Where fixed [[exchange rate]]s are imposed, higher inflation in one economy than another will cause the first economy's exports to become more expensive and affect the [[balance of trade]]. There can also be negative effects to trade from an increased instability in currency exchange prices caused by unpredictable inflation.

;[[Hoarding]]: People buy durable and/or non-perishable commodities and other goods as stores of wealth, to avoid the losses expected from the declining purchasing power of money, creating shortages of the hoarded goods.

;Social unrest and revolts: Inflation can lead to massive demonstrations and revolutions. For example, inflation and in particular [[food inflation]] is considered one of the main reasons that caused the 2010–2011 [[Tunisian revolution]]<ref>"Les Egyptiens souffrent aussi de l'accélération de l'inflation", Céline Jeancourt-Galignani{{snd}}La Tribune, February 10, 2011.</ref> and the [[2011 Egyptian revolution]],<ref name="tna">{{Cite news|url=http://www.thenewage.co.za/8894-1007-53-Egypt_protests_a_ticking_time_bomb_Analysts|title=Egypt protests a ticking time bomb: Analysts|author=AFP|publisher=The New Age|date=January 27, 2011|access-date=January 29, 2011|url-status=dead|archive-url=https://web.archive.org/web/20110209104208/http://www.thenewage.co.za/8894-1007-53-Egypt_protests_a_ticking_time_bomb_Analysts|archive-date=February 9, 2011|df=mdy-all}}</ref> according to many observers including [[Robert Zoellick]],<ref>"Les prix alimentaires proches de 'la cote d'alerte'" – Le Figaro, with AFP, February 20, 2011.</ref> president of the [[World Bank]]. Tunisian president [[Zine El Abidine Ben Ali]] was ousted, Egyptian President [[Hosni Mubarak]] was also ousted after only 18 days of demonstrations, and protests soon spread in many countries of North Africa and Middle East.

;[[Hyperinflation]]: If inflation becomes too high, it can cause people to severely curtail their use of the currency, leading to an acceleration in the inflation rate. High and accelerating inflation grossly interferes with the normal workings of the economy, hurting its ability to supply goods. Hyperinflation can lead people to abandon the use of the country's currency in favour of external currencies ([[dollarization]]), as has been reported to have occurred in [[North Korea]].<ref>{{Cite news |author=Hanke |first=Steve H. |date=July 2013 |title=North Korea: From Hyperinflation to Dollarization? |url=http://www.cato.org/publications/commentary/north-korea-hyperinflation-dollarization |website=Cato Institute |url-status=live |access-date=August 21, 2014 |archive-url=https://web.archive.org/web/20201226020043/https://www.cato.org/publications/commentary/north-korea-hyperinflation-dollarization |archive-date=December 26, 2020}}</ref>

;[[Corruption]]: Due to a high rise of inflation,<ref>{{cite web |title=Inflation worldwide – Statics & Facts |url=https://www.statista.com/topics/8378/inflation-worldwide/#topicOverview |website=Statista |publisher=Einar H. Dyvik |access-date=March 11, 2024}}</ref> it has been seen to affect unemployment levels around the world. From 2005 to 2019, it was found that the wellbeing costs of unemployment was 5 times higher than inflation. The trust between the central banks and individuals has become more limited. According to the Global Labor Organization (GLO),<ref>{{cite web |title= Organization |url=https://glabor.org/organization/ |website=Global Labor Organization |date=July 28, 2017 |access-date=March 11, 2024}}</ref> a global sample of 1.5 million observations during the 1999 and 2012 found a negative relationship of ECB unemployment between countries of Spain, Ireland, Greece, and Portugal a financial crisis.<ref>{{cite web |title=The societal costs of inflation and unemployment |last1=Popova |first1=Olga |last2=See |first2=Sarah Grace |last3=Nikolova |first3=Milena |last4=Otrachshenko |first4=Vladimir |date=2023 |url=https://www.econstor.eu/bitstream/10419/279442/1/GLO-DP-1341.pdf |website=Global Labor Organization |publisher=EconStor |access-date=March 11, 2024 |url-status=live |archive-url=https://web.archive.org/web/20240313051643/https://www.econstor.eu/bitstream/10419/279442/1/GLO-DP-1341.pdf |archive-date= Mar 13, 2024 }}</ref> Lack of trust is shown between the government and political institutions which potentially, this can create bias towards both sides as unemployment rate will still increase. If the rate goes on, predictions of the economic activity may decrease, and investments from around the world will soon slowdown creating an "economy crash" that can affect millions of peoples' living.<ref>{{cite web |last1=Claessens |first1=Stijin |last2=Kose |first2=M. Ayhan |title=Recession: When Bad Times Prevail |url=https://www.imf.org/en/Publications/fandd/issues/Series/Back-to-Basics/Recession#:~:text=The%20unemployment%20rate%20almost%20always,with%20turmoil%20in%20financial%20markets. |website=F&D |publisher=IMF  |access-date=March 11, 2024}}</ref>

;[[Allocative efficiency]]: A change in the supply or demand for a good will normally cause its [[relative price]] to change, signaling the buyers and sellers that they should re-allocate resources in response to the new market conditions. But when prices are constantly changing due to inflation, price changes due to genuine relative [[price signal]]s are difficult to distinguish from price changes due to general inflation, so agents are slow to respond to them. The result is a loss of [[economic efficiency|allocative efficiency]].

;[[Shoe leather cost]]: High inflation increases the opportunity cost of holding cash balances and can induce people to hold a greater portion of their assets in interest paying accounts. However, since cash is still needed to carry out transactions this means that more "trips to the bank" are necessary to make withdrawals, proverbially wearing out the "shoe leather" with each trip.

;[[Menu cost]]
[[File:Subway pizza inflation 2022 jeh.jpg|thumb|upright=1.2|Low-cost price adjustment]]
: With high inflation, firms must change their prices often to keep up with economy-wide changes. But often changing prices is itself a costly activity whether explicitly, as with the need to print new menus, or implicitly, as with the extra time and effort needed to change prices constantly.

;[[Inflation tax|Tax]]: Inflation serves as a hidden tax on currency holdings.<ref>{{Cite journal|last1=Cooley|first1=Thomas F.|last2=Hansen|first2=Gary D.|date=1989|title=The Inflation Tax in a Real Business Cycle Model|url=https://www.jstor.org/stable/1827929|journal=The American Economic Review|volume=79|issue=4|pages=733–748|jstor=1827929|issn=0002-8282|access-date=October 7, 2021|archive-date=October 8, 2021|archive-url=https://web.archive.org/web/20211008164402/https://www.jstor.org/stable/1827929|url-status=live}}</ref><ref>{{Cite web|title=Inflation: A Tax on Money Holdings|url=https://www.economics.utoronto.ca/jfloyd/modules/inft.html|access-date=2021-10-07|website=www.economics.utoronto.ca|archive-date=November 11, 2020|archive-url=https://web.archive.org/web/20201111215101/https://www.economics.utoronto.ca/jfloyd/modules/inft.html|url-status=live}}</ref>