Method to control Inflation

Mukund Pathak September 16, 2022

 


INFLATION

There are Three types of Inflation :

  1.     Cost – Push Inflation
  2.       Demand Inflation
  3.       Printing Money

Cost – Push Inflation :

·        “Cost of businesses rise and is then Pushed onto Customers”

·        Reasons : Increase in OIL PRICE, Increase in SALARIES, Increase in LAND/ REAL ESTATE, Increase in RENT

Demand Inflation :

·              ·   “More people wanting Something there isn’t Enough of.”

·              ·     Reason: Increases in People Getting Richer, Decrease in Interest Rate

Printing Money:

·                ·  Government Wants to Stimulate Economic Growth

·               ·   Reason: Increase in Creating Jobs, Increase in Economy

 Method to control Inflation:

There are three method to measure and control inflation, their are as follow:

a) Contractionary Monetary Policy

b) Contractionary Fiscal Policy

c) Direct Control Measure

a) Contractionary Monetary Policy :

  • OMO by selling the securities
  • Increase in Reserve Requirement (r.r.)
  • Increase in Bank Rate / Discount Rate
  • Increase in Interest Rate

 b) Contractionary Fiscal Policy :

  •  Lowering Government Spending 
  • Increase taxes

c) Direct Control Measure :

  • Price Control
  • Compulsory saving 
  • Increase Labour Production 
  • Wages control
  • Anti-hoarding campaign 


Tags:

Post a Comment

0 Comments