BANKING AFFAIRS

Detailed explanation-1: -One of the most common and often used measures to do so are monetary measures. Here, the government with the help of the Reserve Bank of India attempt to control the supply of money and credit in the economy. Controlling the liquidity levels in the market is an effective way to check inflation in the economy.

Detailed explanation-2: -Inflation is sometimes classified into three types: demand-pull inflation, cost-push inflation, and built-in inflation. The most commonly used inflation indexes are the Consumer Price Index and the Wholesale Price Index.

Detailed explanation-3: -They are the Consumer Price Index (CPI) and Wholesale Price Index (WPI).

Detailed explanation-4: -Inflation can be controlled by a contractionary monetary policy is one common method of managing inflation. A contractionary policy aims to reduce the supply of money within an economy by lowering the prices of bonds and rising interest rates. Thus, consumption falls, prices fall and inflation slows down.

Detailed explanation-5: -Inflation is the general rise in the prices of goods and services in an economy, over a period of time. It reduces the purchasing power of consumers, because each unit of currency can purchase fewer products with an increase in the general price levels.