The issue of too much currency “INFLATION”-part two

                             The issue of too much currency “INFLATION” – part two

Natural calamities can cause inflation. If the production of a country is affected by floods or famine etc. Its ultimately result is inflation and there will be an increase in price.

War is another important cause of inflation. The war always creates inflation in the economy of a country for example; Pakistan was making progress by leaps and bounds before indo-Pakistan war 1965. After that war the economy of Pakistan was badly affected and in 1971 indo-Pakistan war brought the worst setback for the people of Pakistan. As a result it found no other way except to devalue its currency to rebuild the economy. Then the flood in 1973 spread destruction in all over the Punjab and Sindh and took thousands of lives. Besides, the sharp increase in oil price proved as worst for the economy as the 1971 war. As a result of all this the prices increased sharply. The balance of payments came to the lowest limit. The currency was once again devalued and the result of it was rise in prices.

Another cause of inflation is the standard of living of people. With an increase in their income, they create the demand of goods and other luxuries and this situation increases the price of things. International circumstances also affect the economy of a country. If the price of different things like petrol, oil or machines are increased, then the country who imports these things will be compelled to increase the price. There are many other reasons of inflation in our country such as the political crises.

Now the question is how to control the prices. The answer is not easy but economists suggest different steps which are given below. 

• Imports should be reduced.
•  Exports should be increased.
• The circulation of currency should be controlled.
• The free foreign exchange policy should be controlled.
• The use of luxuries should be avoided.
• Our factories should increase their production so that we may export the surplus production and earn freign exchange.

After taking the above mentioned steps the rise in prices can be controlled in the long run. The Government should avoid further devaluing the currency.

Here...Alas Mrose...the original contents by www.sensualityface.com or www.fairyage.com / describe with the help of B. Com part 1 & Prof