Inflation and Price Stability

Understanding Inflation Control Measures

1. Inflation control measures are policies implemented to stabilize prices and maintain economic balance.
2. They are broadly categorized into Monetary Policies and Fiscal Policies.

Monetary Policy Measures

1. Monetary policy is administered by the central bank (e.g., the Reserve Bank of India) to regulate money supply and interest rates.
2. Controlling money supply: Reducing the availability of money in the economy to lower

Inflation refers to the sustained increase in the general price level of goods and services in an economy over a period of time.

1. Inflation measurement involves tracking the change in price levels of goods and services over a specific period.
2. Common indicators for measuring inflation include the Wholesale Price Index (WPI), Consumer Price Index (CPI), and GDP Deflator.

Wholesale Price Index (WPI)

1. WPI measures the average change in the price of goods at the wholesale level.
2. It is focused on bulk transactions and excludes retail prices.
3. The WPI includes prices of

1. Inflation refers to the sustained increase in the general level of prices for goods and services over time.
2. It leads to a decline in the purchasing power of money.
3. There are two main types of inflation: Demand-pull inflation and Cost-push inflation.

Demand-pull Inflation

1. Demand-pull inflation occurs when the aggregate demand in an economy exceeds its aggregate supply.
2. This type of inflation is often described as "too much money chasing too few goods."