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8 May, 2015 - 11:18

Depending on its severity, inflation may have a mild stimulative effect (called forced saving) or a serious recessionary effect (especially in hyperinflation). Most commonly, continuous price changes make consumers not sure of what the real value of products is, and the uncertainty reduces the volume of purchases.

Historically, periods of inflation have been associated with peaks of economic activity. The high price of products and the uncertainty about what the real value of product should be, has been identified as a cause of the slow down in purchases in the inflationary years of 1970-80 in the United States. But, some countries manage to adjust to high rates of inflation.