Inflation and its solution

... Exclusive summary Inflation is the inevitable result of economic growth. However, the high inflation will also threaten a country's economy to grow stably. Australian government and Reserve Bank of Australia's official target is to keep inflation rates between 2-3 per cent per annum. If the inflation rate above the RBA's target, it would cause three types of concerns to economy and society, they are output effect, means the output will fall when prices increase; income redistribution and wealth effects, means inflation makes somebody better off and others worse off; and the effects on international competitiveness means a country becomes less competitive in global economy when its exports fall and imports increase during inflation. RBA can use contractionary monetary policy to decrease the inflation pressure. This can be achieved by combing the open market operation and transmission mechanism. Eventually, the inflation pressure will fall when the aggregate demand and expenditure decreased. Introduction Inflation is an

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