What is inflation?
Inflation is an economic phenomenon that occurs when prices rise in an economy over a certain period of time. It is often measured by the Consumer Price Index (CPI), which reflects the average cost of goods and services within a particular market. Inflation affects all facets of the economy, whether it be costs to households, businesses and governments alike.
How to control inflation?
Controlling inflation is an important concern within many countries. Economists recommend a combination of fiscal and monetary policies to help manage the rate of inflation. Fiscal policy involves the government using taxation and public spending to influence economic growth, while monetary policy uses interest rates and money supply to affect economic activity. These policies are used in tandem to seek an equilibrium between price stability and economic growth by controlling demand-driven inflation.
How inflation occurs?
Inflation is an inevitable consequence of economics and is defined as an increase in the prices of goods and services. It often occurs when there is a high demand for goods combined with limited supply, or when governments and central banks circulate too much currency into circulation. With a higher number of goods being bought at increased prices, it causes an imbalance between the prices of goods offered and their actual value.