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Inflation Essay: Methods to Control Inflation

At first, let us give a simple explanation to the phenomenon called ‘inflation’. In short, inflation occurs when the economy is growing due to the increased spending. In case it ever happens, the prices are getting higher and the currency is worth less that usually. This leads to the fact that the currency can buy less than it would before. When this or that country faces with the inflation, the government is required to take a range of actions to stabilize the economy of the land. There is a number of methods that once applied can help the government of the country keep the inflation under control.

– The Control of the Wages

In case the phenomenon is caused by the wage inflation, then the representatives of the government may limit the wage growth. This can help moderate inflation. This kind of actions can help to reduce the cost push inflation as well as balance the demand pull inflation. But the problem is that it may be quite difficult to keep the inflation under control through income policies, especially when the question is about the powerful unions.

– Monetarism

Through monetarism the government of the country can control inflation as well. The representatives of this area tend to think that there is a solid connection between the inflation and the money supply. In case you’re able to keep the money supply growth under control, then you should be able to keep inflation under it as well. The monetarists would point out the policies like control of funds being created by the country’s government; tightening monetary policy and deflationary fiscal policy. But the truth is that the actual connection between the inflation and money supply is not as strong as monetarists tend to believe.

– Side Policies Supply

More often than not, inflation is caused by the constant uncompetitiveness and rising costs. Through the side policies supply one can enable the economy to get more competitive as well as properly moderate all the pressures related to the inflation. Let’s say, the labour markets that are more flexible can help to reduce the pressure caused by the phenomenon. Nonetheless, the side policies supply can take a long period of time and, what is more, is cannot deal with the inflation that is the result of the rising demand.

To cut the long story, the process of controlling inflation is an integral part of the economic activities of any country. Keeping it under control is crucial for the reason that an as unrestrained increase of the prices can lead to the hyperinflation, as well as deflation (excessive fall of the prices). Both of the situations are absolutely unhealthy for the economy, as well as development, of the land and for the overall growth of it.

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