Question

Why it is necessary to measure inflation?

Answer 1

It is necessary to measure inflation accurately because then only proper measures could be taken to overcome it.

EXPLANATION:

• Inflation is a condition in which prices of essential commodities increase to very high amounts in a very short period of time. It is really harmful to the economy of the country if it is happening in a non-periodic manner and in a short period of time.
• To overcome this condition the central bank of the country increases the bank rate, which is the rate on which commercial banks get their loans. In India, it is done by Reserve Bank of India. Inflation also affects the purchasing power of the consumer and the capital flow in the market is restrained by this which in term affects the Gross Domestic Productivity of country and finally affects the growth rate of the country.
• Therefore, proper steps are taken to overcome this condition and for this, the accurate measurement of inflation rate is required and that’s why it is necessary to measure inflation.