ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Inflation is the rise in prices of services and goods we use every day. In other words, it is the decline of a currency’s purchasing power over time. It tells us about the rate at which a currency’s value is reducing. In the early day, nations printed money blindly and it led to an increase in prices.

Detailed explanation-2: -This lowers the purchasing power and value of the money being printed. In fact, if the government prints too much money, the money becomes worthless. We have seen many governments give in to this temptation, and the result is a hyperinflation.

Detailed explanation-3: -Rising prices To get richer, a country has to make and sell more things – whether goods or services. This makes it safe to print more money, so that people can buy those extra things. If a country prints more money without making more things, then prices just go up.

Detailed explanation-4: -Inflation increases your cost of living as it reduces the purchasing power of each unit of currency. And excessive money in supply can actually lead to ‘ hyperinflation ‘. History says it all.

Detailed explanation-5: -Long-lasting episodes of high inflation are often the result of lax monetary policy. If the money supply grows too big relative to the size of an economy, the unit value of the currency diminishes; in other words, its purchasing power falls and prices rise.