What is the connection of inflation with macroeconomics? 

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pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

Inflation is one factor that shows the health of the overall macroeconomy.  The higher the level of inflation, the less healthy the economy is.  Inflation can occur, for example, when a country's government goes too deeply in debt.  The government might then start to "print money" to get out of debt.  This can cause inflation.  Inflation is unhealthy for an economy because it brings uncertainty and it makes people less likely to save.  When inflation is high, people are likely to spend their money right away before it loses its value.  When inflation is high, people and banks are unlikely to lend money for fear that it will lose its value.  In these ways and others, inflation is something that is bad for a macroeconomy.  Therefore, it is an issue of concern for macroeconomics.

nikasho0100's profile pic

nikasho0100 | Student, Grade 12 | (Level 1) Salutatorian

Posted on

Macroeconomics looks at an economy or country as a whole(Aggregate). Unlike microeconomics it takes everything into account not only one part.

Inflation is something realted to a country as a whole.Therefor it is directly linked to macroeconomics. Also inflation is one of the governments most important macroeconomic objectives.

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