With Reference to Inflation in India, Which of the Following Statements is Correct?
- Controlling the inflation in India is the responsibility in India is the responsibility of the Government of India only
- The Reserve Bank of India has no role in controlling the inflation
- Decreased money circulation helps in controlling the inflation
- Increased money circulation helps in controlling the inflation
Answer: (3) Decreased money circulation helps in controlling the inflation
Inflation is the percentage change in the value of the wholesale Price Index on a year on year basis. When the price level rises, each unit of currency buys fewer goods and services. Inflation affects an economy in a varied way like positive and negative.
Inflation occurs due to an imbalance between demand and supply of money, changes in manufacture and distribution cost or increase in taxes on the item.
Formula for calculation Inflation
(WPI in month of current year – WPI in the same month of the previous year) X 100
WPI in the same month of the previous year
There are several variations on inflation: