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Inflation is an increase in the overall level of prices in the economy. Inflation rate is the Percentage change in the price index from the preceding period. Inflation happens when an economy grows due to increased spending. Prices rise and currency in the economy is worth less than it was before. Currency won’t buy as much as it would before in previous years. The exchange rate weakens when compared to other currencies. For example: Inflation through wages earned and price controls can cause a recession . The result of this will hurt people whose jobs are are lost. The consequences to control inflation could be a recession.  Contractionary Monetary Policy comes to mind first when I think of inflation. Main goal here is the reduction of money supply within the economy through lowering bond prices and increasing interest rates. Spending would be reduced based on when there is less money flowing , those who have money want to maintain it and save as much as they can. .. Not spending money is the main goal of households here.Credit is a main factor here as well. There is less credit available also. Spending is reduced based on the amount of available credit. If there is less available credit, then, spending is reduced. Reducing spending will become a major factor in helping reducing economic growth and also the rate of inflation.  As in deflation the price level decreases . The central bank takes various measures to control it . Central bank increases the reserves for commercial banks through cheap money policy. they do so that they can buy securities reducing its interest rate . This results in their ability to extend credit facilities to borrowers increases. On the other hand under negative interest rate policy means the depositor must pay , rather than receiving interest on deposits .If it becomes costly for people to hold onto money it will encourage the people to spend more on consumption and investment projects. For example, in early 1990’s there was a deflation happened in japan and it took these quantitative easing policies / zero rate policy but failed and deflation persisted. there were lot of reasons for deflation like insolvent banks ,fallen asset prices ,tight monetary conditions etc.  “The real problem is deflation .That is the exact opposite of inflation buy equally serious to the borrowers” by Jack Kemp. if you see various quantitative methods to control inflation exact opposite are used to control deflation.  Like for example if in inflation central bank sell securities then on the other hand in case of deflation its buys securities and both inflation and deflation are not favourable for borrowers.

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