ECONOMICS IN PRACTICE - Essay Example

Economics in practice: How High Inflation Rates are Affecting Business People. Economics in practice: How HighInflation Rates are Affecting Business People.The purpose of this paper is to conduct an interview to find out how high inflation rates is affecting business people. The following is an interview that took place between me and Richardson who is a business man.ME: There has been a high increase in the inflation rate in the past month. I would wish us to review the impact of this increase to you and other business person.

Would you say that this increase has affected you and your business?Richardson: Yes! As you well know, inflation is a general increase in prices. It has negatively affected me and my business since it has increased the cost of production from the increased input prices. ME: Have you adjusted your employee’s salaries given that the real value has reduced?Richardson: Yes! We have had to adjust our employee’s salaries to match their salaries before inflation.ME: Except prices how else have you been affected by the high inflation rates?

Richardson: Most of our savings are in banks since we were planning on establishing a new branch out of town and now the value is reducing as the money loses value, we are afraid we might not recover unless prices stabilize.Most of our investors have also withdrawn their interest in investing with us until the prices stabilize since there are uncertainties and increased risk incidents, and this is also negatively affecting my business. Banks have also been increasing their interest rate that is reducing our ability to borrow in order to fund our operations.

ME: Are there any positive impacts?Richardson: Yes, most of our debts have been lowered, and we are planning to take advantage of the inflation and pay our creditors off.ME: Thank you for your time. Are there any recommendations you would suggest?Richardson: Due to inflation’s negative impact in economic development I would urge the government to ensure maintenance of low rates and hence reduce their negative impacts