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Explain why the control of inflation is an important objective of government economic policy.
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| Submitted: Mon Sep 15 2003
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Explain why the control of inflation is an important objective of government economic policy Inflation is defined as a persistent rise in the general or average price level and is usually given as the percentage change on the previous year. Governments will often have very set aims with what it wishes to happen to the rate of inflation. This is because changes in the inflation rate can have vast repercussions in many aspects of the economic environment. There are two different causes of inflation. It can be caused by excess demand in the economy. If this occurs it means that the amount of people who want a product exceeds the amount being produced. It causes an increase in demand, which is represented as a shift to the right of the demand curve on the appropriate diagram. This is not a problem if there are the necessary resources to cope with the...
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