What are the COSTS asssociated to INFLATION?
1. erodes the standard of living on a fixed income, can aggravate social inequities.
2. reduced the real value of investments such as fixed-rate loans, since they are paid back in dollars that are worth less.
3. distorts signals to economy participants that are normally given through asset prices
4. accelerating inflation generally causes increase in interest rates, which may lead to reccessionary periods.