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Explain why inflation is an important macroeconomic
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| Submitted: Fri Aug 15 2003
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Economics 1) Explain why inflation is an important macroeconomic Macroeconomics is concerned with issues, objectives and policies that affect the whole economy. Inflation measures the annual rate of change of the general price level in the economy. Inflation is a sustained increase in the average price level. Inflation is an important macroeconomic because if it is too high then the value of money falls negating any increase in living standards. Inflation directly affects the international competitiveness. If the UK's prices rise faster than Germany's, overseas buyers (as well as all UK buyers) will buy German goods instead of UK goods and services, which would create a substitute effect. If buyers from both the UK and overseas turn away from british goods because of the higher inflation in the UK- this means that employment in the UK will fall, economic growth will also fall and the UK will import...
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