Question

Why should inflation be controlled? explain the various measures to be adopted to control it?

Answer 1

Uncontrolled inflation creates a shortage of money supply in the economy

Lowers standard of living because people cannot buy goods and services needed for quality life.

Such inflation can be controlled by -

Higher loan interest rates will reduce the supply of money in the economy and control inflation.

RBI increases Repo rates and Reverse Repo rates which cuts the money supply to commercial banks. This reduces money supply and controls inflation.

Reduction in government expenditure on non-developmental projects.

Increasing individual, corporate and commodity taxes to reduce money supply.