Low Inflation Rate and its Effects on the Economy
Discuss whether a low inflation rate always benefits an economy.
Inflation and Deflation
Frequently asked question
- Definition of capital goods
- Importance of capital goods in economic growth
II. Reasons why capital goods may increase economic growth
- More capital goods enable more goods and services to be produced
- Increased output may raise living standards
- Increase in employment
- Reduction in costs of production
- Incorporation of advanced technology in new capital goods
III. Reasons why capital goods may not increase economic growth
- Opportunity cost involved in switching resources from producing consumer goods
- Lower living standards in the short run
- Structural unemployment due to fewer jobs
- No need for more capital goods if there is no demand for extra output
- Existing capital goods may be idle
- Summary of the reasons for and against the increase in capital goods
- Importance of considering both sides before making a decision on increasing capital goods.
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