How government control inflation?

Answer 1

As Inflation is defined as too many goods chasing too few goods, they can either raise interest rate in order to reduce consumption and make people save or reduce the money supply by selling out assets and then burn off the money they get away(to reduce the total money in the economy).

Answer 2

If inflation is occurring this means the economy is overproducing and in order to stop inflation the government must slow down or even force the economy to become smaller by reducing the country's GDP. They can do this in several ways:

1.The government can stop inflation by reducing the consumer expenditure component of GDP by increasing taxes or by reducing transfer payments.

2.The government could also decreasing government spending which is another component of GDP.

3.Could also use a monetary approach by increasing interest rates of the national bank. This would also force other interest rates up which would increase the cost of borrowing money and as a result reduce investment spending which is another component of GDP. Increasing interest rates of the national bank would also raise the value of the currency in the country relative to other currencies which will increase imports and decrease exports (exports minus imports is also a component of GDP)

4. The government could also do nothing and allow the forces of the market to decrease production and reduce inflation but history has shown us these forces take a long time to start affecting the economy

Answer 3

Take money out of the economy.

add. Inflation is caused by printing money faster than the real value of produced goods is increased in the country. In reality, the creation of new money lies more in the hands of the bankers than of the Government. And their aims and desires are very different to those of the Government.

But in the final analysis, the government is sovereign in making laws, and can constrain the bankers from creating excess credit.

Answer 4

Governments don't prevent inflation, they cause it. Inflation is caused by the increase in the money supply. All money is created as a loan and carries interest. The interest is not created in the money supply. The money supply can be increased by a number of ways:

- The government borrowing money from a private banks (For example, the central bank).

- Private banks making loans to private individuals or businesses

- Bailout packages, usually initiated by the government

- Outright counter fitting by either the government, banks or private individuals. This has historically been common in wartime.

Answer 5

Inflation reduces the purchase power of the local currency and causes wages and the cost of the inputs of production to spiral higher. It makes interest rates higher and financially damages lenders who will be paid back in less valuable currency. This creates an unstable environment for those running and planning businesses. These effects of inflation are a detriment to the growth of the productive economy.

The monetary authority generally seeks to keep prices stable (moderate inflation) and employment at a maximum. This is said to create en environment that maximizes the output of the economy and the quality of life for its citizens.

Another characteristic of inflation is its affect on the balance of trade. A weaker currency makes a nation's goods seem cheaper to global buyers and it makes global products appear more costly to local buyers. This results in an increase in net exports.

Answer 6

They give money to mice so they can afford cheese and dont steal it...

Answer 7

it is also reduce the expenditure of money and waste time i mean traditional ethics

Answer 8

Rasie interest rate

Answer 9

The government fights inflation by...