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Explain why the control of inflation is an important objective of government economic policy.
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MONETARY POLICY Explain why the control of inflation is an important objective of government economic policy. Inflation is a rise in the general price level. Inflation is generally seen as bad in economic terms and is the cause of much concern for the government, especially when there is an unexpected or sudden rise in the rate of inflation. This is because amongst other things, it gives people a different view on the price of products, (goods seem more expensive), entrepreneurs are not so likely to invest as inflation causes them uncertainty, and it costs the government a lot of money to control inflation. The largest disadvantage of inflation is the direct inverse relationship with employment if one raises the other falls and visa versa. The Phillips curve shows that there is an inverse relationship between UK wage, inflation and unemployment. There are two different types of inflation. One can be caused by...
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