Question

what is meant by inflation

Answer 1

Inflation, in simple words is the decrease in the purchasing power of the money. For example If you are buying a certain item for Rs.100. After few months, due to inflation the purchasing power of money declines. Then you have to pay more money(say Rs. 125) to buy the same item in future. Increase in inflation causes increase in prices of items.

Answer 2

Inflation, in simple words is the decrease in the purchasing power of the money. For example If you are buying a certain item for Rs.100. After few months, due to inflation the purchasing power of money declines. Then you have to pay more money(say Rs. 125) to buy the same item in future. Increase in inflation causes increase in prices of items.

Reasons for inflation.

It happens because of many reasons like if rate of interest for loans is decreased, more number of people will be availing loans and thus more amount of money will be out in the public.

And more is the money, lesser is the value of that. Then inflation happens i.e. purchasing power of money decreases and thus the prices goes up.

So to control the inflation, government has to to control the amount of money in the hands of public. So, the rates for loans are increased or decreased once every two months to control inflation.

Deflation is just the opposite of inflation i.e. increase in the purchasing power of the money.