ELi5: Why is inflation so important for the economy to go?

Question

I meant Grow*

In: Economics

Answer 1

Economies depend on money being useful, whether for buying things, passing hand to hand or by being invested so that businesses and people who need to borrow have access to capital. Without inflation, people might choose to delay spending (no worries, prices will be same next year!) and sit on money (no need to invest, my $1000 will still buy same next year when sitting under my mattress). Also, a couple percent of inflation is important to prevent deflation (falling prices) which make the no inflation situation even worse — more delayed spending or investing when prices are actually falling.