Government Intervention In Resolving Economic Issues Term Paper

Government Intervention In Resolving Economic Issues - Term Paper Example Inflation is a state of an economy in which the value of money is falling i.e. prices are rising. Normally, the rate of inflation i.e. increase in average prices level is measured with the help of price index or GDP deflator. Cost of living is increased, when inflation increases. These are simply directly proportional to each other. This situation badly affects the labor class i.e. the lower class of the country. They have scared financial resources and lots of financial problems to deal with. Increase in street crimes is also one of the problems created by inflation directly. When people have a burden of problems and frustration due to less financial resources but increasing prices, they jump into the street crimes to fulfill their needs. Inequality in Income Distribution is also part of economic diseases born by inflation. Here, the rich become richer and the poor become poorer. An abnormal unbalance is created in society. This may lead to further social and economic problems in the country. A decrease in savings also incurs when inflation is an increasing trend. People will spend all that they will earn and saving no penny for a tough time. The rate of interest will also increase due to an increase in inflations.