How does inflation typically impact businesses?

Inflation typically impacts businesses primarily by causing business costs to increase. As the general price levels rise in the economy, various input costs for businesses, such as raw materials, labor, and overhead expenses, also tend to rise. This means that companies may have to pay more to produce their goods and services, which can affect their profit margins. If companies are unable to pass these increased costs onto consumers through higher prices, they may face challenges in maintaining profitability.

In contrast, the other options do not accurately depict common inflationary impacts. Wages decreasing during inflation is less likely, as workers often seek higher wages to keep up with rising living costs; products becoming less expensive contradicts the basic premise of inflation, which is about rising prices; and while consumer spending may rise in specific scenarios, typically inflation can squeeze consumers' purchasing power, leading to more cautious spending behavior. Thus, the increase in business costs due to inflation is the most immediate and impactful effect on businesses during inflationary periods.