Which of the following effects can high inflation have on an economy?

High inflation can significantly decrease the value of money, which means that as prices of goods and services rise, each unit of currency buys fewer products than it did previously. This erodes the purchasing power of consumers, making it more challenging for individuals and families to afford the same standard of living. When inflation is high, the real value of savings diminishes as well because the money saved today will not have the same worth in the future when inflation continues to drive prices up. This can lead to increased uncertainty in the economy, causing businesses and consumers to adjust their spending and investment behaviors.

The other options do not accurately represent the effects of high inflation. For example, an increase in purchasing power is counterintuitive in the context of high inflation since it typically leads to a decline in purchasing power. Similarly, high inflation does not stabilize prices; rather, it creates volatility in the economy, and it generally does not contribute to higher savings rates as the value of those savings declines over time.