Is inflation bad for the economy?

Question

Zippia Team · Accepted Answer

Yes and no. Inflation affects employment and other aspects of the economy, meaning that a stable rate is better than anything else. The federal government tries to keep inflation between 1-2% to ensure maximum employment and growth.

This is because deflation is incredibly harmful to the economy. Decreasing prices might seem like a good thing on the surface, but prices fell 10% during the worldwide Great Depression in the 1930s; workers had less to spend and lost their jobs on mass.

On the other hand, walking inflation is also dangerous. This is when prices rise between 3%-10% per year, and that level of inflation can cause workers to be priced out of markets or at least spend too much of their hard-earned paycheck on goods and services.