What are the positive impacts of Inflation?

Positive impacts of inflation are:

1. Higher profits : Profits of the producers are generally favourably affected by inflation, because they can sell their products at higher prices.

3. Higher investment : The entrepreneurs and investors get added incentives to invest in productive activities during inflation, since they can earn higher prices.

4. Higher production : If productive investment grows during inflation, it would lead to higher production of various goods and services in the economy.

5. Higher employment and income : Increase in the output of different goods during inflation would also mean increasing demand for various factors of production. So, it is expected that employment and income opportunities will also increase during inflation.

6. Possibility of higher income for the shareholders : During inflationary periods, if the companies earn higher profits, they can declare dividends for their share-holders. Hence, the dividend income of the shareholders may also rise during inflation.

7. Gain for the borrowers : Inflation means a decrease in the value or purchasing power of money. If the rate of interest to be paid by the borrower is less than the inflation rate, the borrower will gain. Because the real value of the money returned by the borrower is actually less than that of the money borrowed earlier.

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