True: Inflation reduces the living standards of those on fixed incomes, Real income falls as money loses it purchasing power., It reduces the real value of savings if the interest rate is less than the rate of inflation., Real Rate of Interest = Nominal Rate of Interest – Rate of Inflation., Inflation causes unemployment., Inflation reduces the real value of profits of firms competing with foreign firms., Inflation reduces the willingness to invest due to uncertainty., If UK inflation is higher than in other countries it will make exports more expensive and less attractive to foreign buyers., Inflation reduces economic growth because firms are unwilling to invest, False: Inflation improves the living standards of those on fixed incomes, Real income rises as money gains in purchasing power., It increases the real value of savings if the interest rate is less than the rate of inflation., Real Rate of Interest = Nominal Rate of Interest + Rate of Inflation., Inflation reduces unemployment, Inflation increases the real value of profits of firms competing with foreign firms, Inflation increases the willingness to invest due to uncertainty, If UK inflation is lower than in other countries it will make exports more expensive and less attractive to foreign buyers., Inflation creates economic growth because firms are willing to invest,

N5 Economics Inflation - Costs of Inflation

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