Economics

Your answer should include at least two of the following points.

Inflation can result in a reduction in the purchasing power of producers and consumers as prices rise and profits and real wages decline.
Inflation produces a redistribution of income away from wage and fixed income earners to more speculative areas such as the share market and real estate investment.
Inflation results in the loss of international competitiveness as rising costs (relative to our trading partners) increases the price of our exports. Imports will also become more attractive as their price falls relative to domestically produced goods.
Inflation produces a reduction in the level of real savings and investment.
The budget outcome could be affected due to rising costs, with inflation reducing the surplus or increasing the deficit. Higher debt repayments may result, as the government has to borrow money, increasing the CAD.