The costs of inflation include hyperinflation, shoe leather costs and menu costs that all play crucial roles in different ways. Hyperinflation is when a country has a very high and usually accelerating inflation and smaller money becomes worthless. Shoe leather costs is when a countries inflation rate encourages citizens to get rid of their money holdings. Last menu cost is when a company is constantly changing its prices to every small aspect they change. I think that the most important is shoe leather costs because it can deplete a countries wealth very quickly if many citizens quickly get rid of their money holdings and cause a quick and big inflation rate.
Deflation can lead to falling prices and in turn causes companies to lay off workers and cut pay to others. It would be a problem for all those who take part in the economy because as prices fall and pay falls unemployment rises and the poor get poorer and the rich also begin to loose some of their wealth. It also would cause less demand for specific goods and services because people will not want to spend the extra money with their wages going down.
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