Answer Posted / abbas

first we have to know the defition and reasons for raising
of inflaion,then we can say easily the answer
What is Inflation?
Inflation is an increase in the price of a basket of goods
and services that is representative of the economy as a
whole.
What causes Inflation on a whole ?
>The supply of money goes up.
>The supply of other goods goes down.
>Demand for money goes down.
>Demand for other goods goes up.
so here, we concentrate on the
(DEMAND FOR MONEY GOES DOWN),here rbi intention is that to
create the demand to money,when rbi hike the rate of
reporate automatically banks also hike the interest rate on
the loans then customers are not come forward to take a
loans then there is no money in the market obivously, there
is a huge demand to the money in the market and again chain
will follow viz., supply....demand...(life cycle)

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