What is meant by inflation? Explain it.
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Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. Central banks attempt to limitinflation — and avoid deflation — in order to keep the economy running smoothly.
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Inflation refers to an increase in the prices of goods and services in an economy over a given period of time.
* Under such circumstances, the value of money falls and thereby the prices increase.
* The Reserve Bank of India monitors the inflation rate by its credit control instruments.
* The bank rate, repo and reverse repo rates are regulated in the monitory policy by the central bank to control inflation.
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