What measures should be taken to avoid inflation to gain
Inflation refers to the continuous increase in the average price level in the economy. Purchasing power of money is the amount of goods and services that can be purchased by using one monetary unit. When the economy experience inflation, the purchasing power will fall; because, people can purchase lesser quantity of goods and services with the given income.
During inflation, the government may adopt either contractionary monetary policy or contracionary fiscal policy. Contractionary monetary policy includes the measures such as increasing the interest rate to reduce the expenditure and induce savings in the economy, the measures to reduce the money supply in the economy such as open market sale of the government securities etc. when these monetary policies are introduced, it reduces the disposable income, which leads to decrease aggregate demand. This causes reduction in price level.
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