Essay on Women Empowerment for IBPS PO Mains 2017

Essay on Inflation for  IBPS PO Mains 2017

In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services. It basically occurs in a situation when the aggregate demand in the economy exceeds the aggregate supply. It could further be described as a situation where too much money chases few goods. A country may have a capacity of producing just 500 units of a commodity, but the actual demand in the country may be 700 units.

Inflation is a determinant in the functioning of any economy. The effects of inflation on an economy are various and can be simultaneously positive and negative. Negative effects of inflation include an increase in the opportunity cost of holding money. Uncertainty over future inflation may discourage investment and savings. Positive effects include ensuring that central banks can adjust real interest rates and encourage investment in non-monetary capital projects.

India is a country with a mixed economy. Hence the challenges faced due to inflation are vital for its growth model. India is an agrarian society, where due to droughts and floods or inadequate methods for the storage of grains, there is lesser or deteriorated output. This further leads to increase in the prices of commodities while the demand remains the same. Inflation in India generally occurs as a result of global-traded commodities. Several efforts have been made by The Reserve Bank of India to weaken rupee against dollar.

Inflation hits the common man first as it hikes the price of general commodities that necessitate the survival in his day-to-day life. So, some measures should be taken to control inflation. The monetary authority generally seeks to keep prices stable and employment at a maximum. This creates an environment that maximizes the output of the economy and the quality of life in its citizens.
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