The consequences of inflation

• Cost of borrowing: High inflation may also lead to higher interest rates for businesses and people
• What will high inflation do to the cost of borrowing?

  increases
• loss of purchasing power: This means the same amount of money can buy fewer goods and services than before. 
• What is the loss of purchasing power?

  loss of purchasing power: This means the same amount of money can buy fewer goods and services than before. 
• Balance of payments: There will be a balance of payments deficit as prices are higher, demand for goods and services decrease
• Due to inflation there will be a balance of payments what?

  deficit
• Why is there a balance of payments deficit in periods of inflation?

  Prices are higher so demand for goods and services decrease