Discuss briefly the causes and consequences of ‘inflation’
in an economy like India.
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Answer / Vishvaeep Gupta
Inflation in India, as in other economies, is primarily caused by increased demand for goods and services without a proportionate increase in supply. Other factors include government spending, taxes, and monetary policies. Consequences of inflation in India include reduced purchasing power of the rupee, increased cost of living, reduced economic growth, and potential social unrest. To combat inflation, the Reserve Bank of India uses various tools such as setting interest rates, controlling money supply, and implementing fiscal policies.
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