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Inflation is a rise in the general level of prices of goods and services in an economy over a period of time.
When the general price level rises, each unit of currency buys fewer goods and services. Therefore, inflation also reflects an erosion of purchasing power of money.
According to Crowther, “Inflation is State in which the Value of Money is Falling and the Prices are rising.”
In Economics, the word ‘inflation’ refers to General rise in Prices Measured against a Standard Level of Purchasing Power.
Here are several variations on inflation used popularly to indicate specific meanings.
Inflation is all about prices going up, but for healthy economy wages should be rising as well. The question shouldn’t be whether inflation is rising, but whether it’s rising at a quicker pace than your wages, if the answer is a Yes only then inflation is problematic.
Finally, inflation is a sign that an economy is growing. The RBI considers the range of 4-5 % as comfort zone of inflation in India.
There is no one cause that’s universally agreed upon, but at least two theories are generally accepted while the debate still goes on:
Inflation is measured by calculating the percentage rate of change of a price index, which is called the inflation rate.
Inflation is often measured either in terms of Wholesale Price Index or in terms of Consumer Price Index.
Effective policies to control inflation need to focus on the underlying causes of inflation in the economy. There are two broad ways in which governments try to control inflation. These are-
1. Fiscal measures.
2. Monetary measures
By: Vikas Goyal ProfileResourcesReport error
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