One way in which inflation can affect economic growth is by reducing consumer spending
When prices are rising, consumers may have to spend more money on basic necessities, such as food and housing
which can leave them with less disposable income to spend on discretionary purchases
This may result in less consumer spending, which would be bad for economic expansion
Additionally, if consumers expect prices to continue rising, they may delay making purchases, which can further reduce consumer spending
When prices are rising, businesses may have to pay more for raw materials and labor, which can lead to an increase in production costs
This can result in lower profit margins, which can make it more difficult for businesses to invest in new equipment, expand their operations, or hire new workers
Additionally, inflation can make it more difficult for businesses to plan for the future, as they may be uncertain about future costs and revenues