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This can occur when the economic conditions are good indicated by high employment numbers, corporate profitability and easy credit.
The other cause for inflation could be because of a artificial forced increase in wage and raw materials.
Importance of inflation
Though popularly referred to and conceived as undesirable, inflation has a positive side as well.
Pros:
• Economic effect due to Investment opportunities
o Though referred to as investment, compensating for inflation is a primary driver to purchase real assets as early as possible. As the cost of construction (wages and materials used) goes up in an inflationary cycle, a house bought using the money borrowed from bank at an interest rate lower than a inflation rate is a money making opportunity...
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