Which of the following is a potential negative effect of high inflation?

High inflation can create uncertainty in the economy, leading to reduced consumer spending for several reasons. When prices rise rapidly, consumers may feel that their purchasing power is being eroded, making them more cautious about their spending habits. This uncertainty can stem from the unpredictable nature of future prices, which makes it difficult for consumers to plan their finances effectively. As consumers focus on essentials or delay non-essential purchases, overall demand in the economy may decline, potentially slowing economic growth.

In contrast, increased consumer confidence typically accompanies stable or low inflation rates, as consumers feel secure in their financial situation. A decrease in international trade is more likely to occur due to various factors, such as trade policies or currency fluctuations, rather than solely from high inflation. Lastly, while high inflation might lead to increased nominal savings rates, the real value of those savings can diminish if inflation outpaces interest earnings, which does not necessarily encourage saving. Thus, the potential negative effect of high inflation is that it creates uncertainty, leading to reduced consumer spending.