eli5: If a 2% inflation is considered good and healthy, will this not at some point cause abnormally high money values or a currency crash?

Question

eli5: If a 2% inflation is considered good and healthy, will this not at some point cause abnormally high money values or a currency crash?

In: 0

Answer 1

Absurdly high monetary values: Yes.

Currency crash: not if it maintains that rate on average.

For a currency to crash people have to lose faith in it. This normally occurs if there is a rapid devaluation. A slow but steady devaluation allows the public time to adjust without causing a panic.