Question about inflation?
How do the governments and banks control inflation? What causes inflation? Are interest rates related to inflation or deflation? Someone was telling me that governments exchanges say canadian dollars for indian currency and then wait for their currency to rise and then tthey exchange it back? How does this cause inflation or deflation?
When there is more demand than supply is there a surplus or a defecit?
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Government has inflation policies to help fight inflation.. in australia the inflation aim is 3-4% i think. research the inflation policies, for example they might raise tax , or raise indirect tax.. thats how they stop inflation (tax)
banks control inflation by raising interest rates (stops people from spending as much), they do it gradually at a time, say raise it a quarter every month or so other wise if they raise it heaps in a month then no one has time to adjust causing more inflation & unemployment.
inflation is caused by people spending too much money (high employment), it could also be caused by someone asking for a pay rise, then the company needs to increase there prices, & then the cycle happens again (prices rising) & then you cant afford the stuff. or it could be the opposite where the prices rises first and people cant afford so they need to ask for pay rises. inflation is caused by pretty much people spending too much. so there is more demand for the product, so the shops raise prices.
yes interest rates are related, it could stop inflation but at the same time if they raise it too much and too quickly it could also cause inflation .
umm no idea. i know that if you spend your money on stuff from other countries then it reduces inflation in your county.
but since like eveery county in the world is doing bad except australia, noone is having high inflation.. all low. australia ‘s central bank just raise interest rates from 3% to 3.25%