11. An aim of government policy is usually not to let the rate of inflation become high. Why is this? [6]

11. An aim of government policy is usually not to let the rate of inflation become high. Why is this? [6]
Because inflation has lots of costs to the economy. Firstly inflation affects the value of saving in the economy. If people use the money saved at the time of high inflation, they will be able to buy fewer goods and services. It also affects the distribution of income where lower income groups real income falls tremendously compared to higher income groups real income. Moreover inflation lowers the international competitiveness of domestic goods and services which will decrease the export of the country. This will have a diverse effect on balance of payment. For these reasons the government usually not let the rate of inflation become high.