Imagine the economy is a car tyre…
Too much deflation in the economy and the tyre goes flat. This stops the car from driving properly and could even cause a crash.
Nobody wants an economic crash!
Too much inflation and the economy grows so quickly that it bursts – with a great big BANG!
Again preventing the car from driving properly and likely to cause a crash.
Again, nobody wants an economic crash!
But at the right level of inflation, the tyre performs perfectly and the country hums along in economic bliss (still got to keep an eye out for all the potholes in the road though 😬 ).
That’s why government economists are so obsessed with inflation.
Thanks for reading 🙂