Positive Effects of Inflationary Growth on Consumers

Contrary to popular belief, inflation isn't necessarily bad for the economy as a whole. Inflation can bring about further economic growth as well. 

Firstly, while an uncontrolled rate of inflation is indeed harmful for the economy, a moderate amount of inflation over time is in fact an indicator of a healthy economy and shows that there is still a degree of economic growth. This encourages investment in non-monetary capital projects as a trend of economic growth helps boost people's outlook on future economic trends and give them confidence.

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Furthermore, in contrast to deflation, a process which discourages consumer spending and hence lower economic growth and possible leading to stagflation, it is better to have moderate amounts of inflation to encourage foreign investment as well as encourage people to spend. This is much more crucial for a country like Singapore, which is highly susceptible to the changes in the global economy. By spending more and obtaining more investment, there is more income flowing in the economy according to Keynes's theory of circular flow, creating a positive cycle where the more income flows into the economy, the more the economy grows and the more income increases.

As a whole, a moderate amount of inflation helps stimulate economic growth as it bolsters and boosts both consumers' and investors' confidence. People are often affected by their expectations in decision making. In anticipating a future recession, people may choose to save up money and reduce spending in order to be able to cope with the recession. Similarly, when anticipating sustained economic growth, people tend to spend more as a result, resulting in an increased rate of economic growth.