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Inflation
Causes and effects
• Inflation is caused when there is too much demand is more for goods or too much money in circulation.
• Inflation affects the entire economy of the nation.
• A drop in exchange rate, increase in tax or wages can lead to inflation.
• An increase in the quantity of money supply can cause inflation.
Controlling inflation
• Depending on what caused inflation, policies should be implemented. For instance if the cause was excessive demand for commodities, it should be reduced.
• Production costs can be reduced.
• Banks can increase interest rates to avoid circulation of money in excess.
• Trying to maintain a stable and fixed currency rate.
• The supply of gold to the amount sold or output should be stable.
• The percentage of inflation can be measured using the consumer price index. It is a measure for price change based on production of goods
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