Inflation

A rise in the general level of prices which results in a fall of purchasing power and the decline of the value of money. Inflation adversely affects the [[Economy]] by increasing uncertainty and discouraging savings. It also means high nominal rates of interest which discourages investment. It also negatively affects the [[Balance of Payments]] by making imports cheaper and exports more expensive. Furthermore, a fall in the value of money will redistribute income - it will remove purchasing power from those living on fixed incomes (eg. pensioners) and shift it towards those who draw a variable income from prices and interest.