Prices of consumer goods and services in an inflation usually outrun most prices of factors of production. Rises in consumer prices steadily erode the purchasing power of a given currency unit. Inflation would matter little if it was smooth, uniform, and all incomes were adjusted perfectly in line. But it does not work like that. Creditors and those on fixed income, such as many retired persons, lose purchasing power during inflation.
Debtors gain by paying back money of lesser purchasing power than when the money was borrowed.
Economists differ in their analysis of the causes of inflation, and therefore in their prescribed cures. Fallon, Teresa TF Bloomsbury Guide to Human Thought 2. Keynesian Theory Bloomsbury Guide to Human Thought 3. Monetarism Bloomsbury Guide to Human Thought 4. All rights reserved.