Project report on inflation

Lowers the Cost of Borrowing

Inflation will generally cut borrowing prices when there is no central bank or when central bankers are subject to elected politicians. Assume you borrow $1,000 at a 5% yearly interest rate. If inflation is 10%, the real value of your loan will depreciate faster than the interest and principal you are paying. When family debt levels are high, politicians find it electorally advantageous to print money, hence fueling inflation and evading voters' commitments. Politicians have an even stronger incentive to print money and use it to pay off debt if the government is significantly in debt. So be it if inflation is the result (once again, Weimar Germany is the most infamous example of this phenomenon).
Because of politicians' sometimes harmful fondness for inflation, several countries have decided that fiscal and monetary policymaking should be handled by independent central banks. While the Fed is required by law to seek maximum employment and stable prices, it does not require congressional or presidential approval to set interest rates. However, this does not imply that the Fed has always had complete discretion in policymaking. Former Minneapolis Fed President Narayana Kocherlakota argued in 2016 that the Fed's independence is "primarily due to the president's prudence after 1979."

6. 
   Reduces Unemployment
   

Inflation has been shown to reduce unemployment in several cases. Wages are sticky, which means they don't vary much in reaction to economic changes. The Great Depression, according to John Maynard Keynes, was caused in part by the downward stickiness of wages. Workers who refused to accept salary cutbacks were dismissed instead, resulting in an increase in unemployment (the ultimate pay cut). The upward stickiness of wages may also act in reverse: after inflation reaches a certain level, companies' real payroll costs decline, allowing them to hire more workers.

The inverse link between unemployment and inflation, known as the Phillips curve, appears to be explained by that concept, while a more prevalent interpretation places the blame on unemployment. As unemployment falls, the theory goes, employers are forced to pay more for workers with the skills they need. As wages rise, so does consumers' spending power, leading the economy to heat up and spur inflation; this model is known as cost-push inflation.

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