When we think about inflation, it is important to look at what is considered good and bad inflation – the Bank of England aims for inflation of roughly 2 per cent a year, so it can’t be all bad! Good inflation can simply be defined as wage increases. As people’s disposable income increases, their discretionary spend goes up and money is circulated around the economy delivering economic growth. Bad inflation is where the price of essential goods and services increases (usually due to a shortage of supply), decreasing consumers’ discretionary spend. Essential goods and services are quite often produced from outside one’s home economy and therefore the essential spend is not recirculated internally, leading to little or no economic growth.
Stagflation is what we find
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