What do you think about inflation?
Answer:
Contrary to what others have said, inflation can stop. Prices can even move the other way, called deflation. The Great Depression was an example of deflation.
Asking what the purpose of inflation is is a little wrong-headed. It is like asking 'What is the purpose of global warming?' Inflation is a process of prices (not costs) rising. It is the result of many other economic factors. It is not a decision in itself.
That said, some argue that controlled inflation is not bad, because it normally shows a growing economy, while deflations shows the opposite. There is a debate on its merits on Wikipedia.
WIth decentralization of banks and currencies, it tends to skyrocket, leading to a devaluation in the currency and in the former SU, for example, the ruble had to be floated.
Inflation is considered a necessary evil. It doesn't ever "stop", such as in Zimbabwe where the inflation rate is above 3000%. However, controlling the inflation rate is important because skyrocketing inflation would destroy the economy because wages are "sticky" and can't change as quickly as prices can.
Inflation itself doesn't really have a purpose, but the causes of inflation do, and are central to a functioning economy with free markets.
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