Answer-Which one of the following is an effect of inflation:

Inflation leads to fall in purchasing power. When the price level rises, each unit of currency buys fewer goods and services consequently, inflation is also erosion in the purchasing power of money a loss of real value in the internal medium of exchange and unit of account in the economy.

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Question

Which one of the following is an effect of

inflation:

A It leads to rise in purchasing power

B It leads to increase in GDP

C It leads to inflow of foreign investments

D It leads to fall in purchasing power

E None of the above

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Solution