Balancing act, inflation dynamics, hyperinflation, distributional effect, small business, diversity, market demand, profit, market volatility, inflation, policy solutions, Hayek, trade off, global society, economic growth, stakeholders
Inflation, often associated with fears and misconceptions, is essential to global economic stability and household well-being. As a significant contributor to global economic dynamics, the complexity of inflation must be considered (Carstens 3).
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The rise in inflation negatively impacts small-scale entrepreneurs, as it lowers people's purchasing power, an implication that is reflected in a decline in demand for goods and services and profitability (Jaravel 600). This is because, as businesses strive to satisfy product demand, prevailing market demand, keeping prices within the competitive boundaries and at the same time maintaining profits become a significant limitation for entrepreneurs during inflation. To resolve this, small businesses must carefully adjust their operations to align with prevailing levels of market volatility to foster their longevity.
[...] "The return of inflation." speech at the International Center for Monetary and Banking Studies, Geneva 5 (2022). https://www.suerf.org/wp-content/uploads/2023/12/f_813ce9042f6ebca30e639cc1b7156507_44173_suerf.pdf Carvalho, Carlos, et al. "Anchored inflation expectations." American Economic Journal: Macroeconomics 15.1 (2023): 1-47. https://www.aeaweb.org/articles?id=10.1257/mac.20200080 Hayek, Friedrich A., and Stephen Kresge. "Choice in Currency 1." Good Money, Part II. Routledge 115-127. https://www.taylorfrancis.com/chapters/edit/10.4324/9781138400085-4/choice-currency-1-hayek-stephen-kresge Jaravel, Xavier. "Inflation inequality: Measurement, causes, and policy implications." Annual Review of Economics 13 (2021): 599-629. [...]
[...] Addressing Inflation's Distributional Effects Distributional consequences of inflation, in turn, express a highly complex picture that includes winners and losers within society. People with income streams may need to be able to make duplicate purchases as they formerly did during the inflation period. Still, borrowers tend to compensate for the rigidity of inflation as the actual value of their debts decreases with each repayment period. This redistribution of wealth through inflation can place a huge question mark on the income inequalities that target various social groups in different ways (Carvalho et al., 18). [...]
[...] For small businesses, a rise in inflation impacts their customer retention, competitiveness, and sustainability. For policymakers, a rise in inflation necessitates that they design and implement more effective monetary and economic policies to prevent economic deterioration for consumers; inflation reduces their purchasing power and, by doing so, affects not only their consumption but their overall financial well-being well-being well-being well-being. For investors, inflation negatively impacts returns on investments and foreign exchange rates while, at the same time, intensifying risk exposures on a wide range of investments. [...]
[...] In addition, tailored support programs suitable to sectors more susceptible to inflation will be helpful to ensure a smooth economic transition. These measures can be represented by subsidy programs, tax incentives, and capacity-building initiatives that aim to build cognitive and technical assets within SMEs. Lastly, providing services that directly align with the goals of small business owners is a crucial element in ensuring a solid and versatile economy that offers an advantage to the members of society in terms of prosperity and social justice. [...]
[...] In addition, investments and innovations are growing as business confidence rises from a correction in a stable and predictable economy. The gradually higher prices contribute to the stability of the economy and the perception of the future by producers. Consequently, companies tend to increase their research and development expenses, invest in infrastructure, and hire more skilled workers. This strategic investment increases the organization's productivity and provides a job-generation ground, thus leading to sustained economic growth and development (Hayek et al., 126). [...]
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