how does inflation impact the economy 
inflation can affect the economy in several ways for example if inflation causes a nation s currency to decline this can benefit exporters by making their goods more affordable when priced in the currency of foreign nations on the other hand this could harm importers by making foreign made goods more expensive higher inflation can also encourage spending as consumers will aim to purchase goods quickly before their prices rise further savers on the other hand could see the real value of their savings erode limiting their ability to spend or invest in the future the bottom linedemand pull inflation explains rising prices in an economy as the result of increased aggregate demand that surpasses supply as consumers demand more given limited supply prices are bid higher demand pull inflation can be contrasted with cost push inflation whereby higher costs of production are passed on to consumers 