Project report on inflation

Weakens or Strengthens Currency

High inflation is frequently linked to a falling exchange rate, albeit this is usually due to the weaker currency causing inflation rather than the other way around. When their currencies depreciate against those of their trading partners, economies that import major amounts of goods and services—which, for the time being, is just about every economy—must pay more for these imports in local currency terms.
Assume that Country X's currency depreciates by 10% versus Country Y's. The latter does not need to raise the price of the products it exports to Country X in order for them to cost Country X 10% more; the weaker exchange rate is enough to do this. When you multiply cost rises by a large number of trading partners selling a large number of items, you get country-wide inflation in Country X.

Measures to Control Inflation:-

There are many ways of controlling inflation in an economy −
Monetary Measure
The most significant means of reducing inflation is the Central Bank's monetary policy. To combat inflation, most central banks utilize high interest rates. The monetary measures used to manage inflation are listed below.
• Bank Rate Policy: The most prevalent technique for combating inflation is the bank rate policy. The cost of borrowing rises as the bank rate rises, reducing commercial banks' borrowing from the central bank.
• Cash Reserve Ratio (CRR): To manage inflation, the central bank must raise the CRR, which reduces commercial banks' lending capacity.
• Open Market Operations: The central bank's sale and purchase of government assets and bonds are known as open market operations.


Fiscal Policy
Fiscal measures are another important set of measures to control inflation which include taxation, public borrowings, and government expenses. Some of the fiscal measures to control inflation are as follows −
• Increase in savings
• Increase in taxes
• Surplus budgets
Wage and Price Controls
Wage and price controls help in controlling wages as the price increases. Price control and wage control is a short-term measure but is successful; since in long run, it controls inflation along with rationing.