ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Price stability in an economy means that the general price level in an economy does not change much over time. In other words, prices neither go up or down; there is no significant degree of inflation or deflation.

Detailed explanation-2: -What Is Price Stability? Price stability occurs when there is an absence of large swings in the general level of prices in the economy. Maintaining price stability entails avoiding lengthy phase of inflation or deflation that are too high, contributes to high employment, and moderate long-term interest rates.

Detailed explanation-3: -Price stability is the condition in which the domestic currency retains its purchasing power by maintaining low and stable inflation as measured by the Consumer Price Index over the medium term (from 3 to 5 years). Price stability does not imply that prices do not change; it means that prices grow at a moderate pace.

Detailed explanation-4: -Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country.

Detailed explanation-5: -In an inflationary environment, unevenly rising prices inevitably reduce the purchasing power of some consumers, and this erosion of real income is the single biggest cost of inflation. Inflation can also distort purchasing power over time for recipients and payers of fixed interest rates.