Effects of Inflation: 1)Rapidly rise in the prices of goods and services, and 2)Consequntly fall in the value of money

Effects on Production: As very harmful for the economy ,inflation has the following adverse effects on the productive activities. 1)Decrease in Value of Money : After the full employment level, the increase in money supply results in hyper inflation ,which discourages public savings and reduces the cap0ital accumulation. 2)Decrease in Foreign Investment :The inflation has an adverse affects on the foreign investment of a particular country, and thereby leads to decrease the production of wealthy in economy. 3)Decrease in Domestic Investment :The inflation has an adverse affects on the domestic investment due to the reduced capital accumulation and then reduces the volume of production in a country. 4)Business Uncertainties: The inflation causes uncertainties in the business and this discourages the entrepreneurs and business community from taking risks in production of wealth in an economy. 5)Diversoiopn of Productive Resources :The inflation results in the diversion of productive resources from essential goods industries to luxurious goods industries and this creates shortage of the consumer goods. 6)Deteriration in Quality of Goods :The inflation industries the manufacturers to neglect the quality of the products to get normal profits, and leads to deterioration in quality of their produced goods. 7)Hording of Essential Goods: The inflation leads to hoarding of the essential goods by the traders as well as the consumers both in order to make betterness in the future . 8)Loss of Confidence : The inflation has an adverse impact on the confidence of the people towards their home currency and towards their wealth or assets.

Effects on Distribution : As always unjust to the poor inflation has the following effects on various groups of the society 1) Debtors are the gainers as they repay less in real terms and the creditors are the losers as they receive less in real terms. 2)Wages and Salary Earners :During the inflation the wage and salary earners are the losers because their purchasing power do not rise in the proportion of rise in their cost of livings. 3)Fixed Income Groups :During the inflation the fixed income groups are worst losers since their money income remains fixed against increase in the prices of goods . 4)Entreprenurs :During the inflation the entrepreneurs (manufacturers, merchants, or business) are the gainers as the gainers as the production costs do not rise as the prices of products rtises rapidly. 5)Investors :During the inflation, the investors investing in the equity shares are the gainers and the investors investing in bonds and debentures are the losers due to a certain fixed interest on them. 6)Farmers:During the inflation ,the farmers are the gainers as they are debtors and they pay to their creditors to their creditors to possess marketable surplus.

Effects on Socio political stability: As dangerous to development of a society ,the inflation has the following non economic effects 1)Class-conflict: Socially, inflation is unjust as it redistributes the income and wealth in favour of the rich and therefore it leads to class conflict in the society. 2)Political Instability :Politically , the instability exists in the economy of the corruption and consequences of suffered morality of the people . In brief ,inflation is unfavourable for the poor unjustifiable for the society and dangerous for the economy of a particular country. b) Fiscal Measures: 1)Government Expenditure :As an important instrument to control inflation the Government has to reduce its own expenditure. 2)Taxation: The Government increases the rates of existing taxes and imposes additional taxes to reduce the purchasing power of the public. 3)Public Borrowing :As government issues bonds to borrow money from public the private savings of the households and business houses is absorbed . 4)Debt Management :The existing public debt should be so managed as to reduce the supply of money and further expansion of credit by commercial banks . 5)Over-Valuation: Over-Valuation discourages exports and leads to increase domestic availability of products . c) Miscellaneous Measures 1)Expansionof Output : The government adopts liberal import policy to kept down the prices of the essential consumer goods through expansion of output. 2)Wages Policy :In order to control the inflation the trade unions oppose but the government consider a cut in wage rates to decrease the incom es of the workers. 3)Price control and rationing : For controlling the prices of the 3essential goods the governmet undertakes price control and rationing .

MEASURES TO CONTROY INFLATION: a) Monetary Measures : 1)Bank Rate : Bank rate is the official rate of interest of the Central Bank (Reserve Bank of India) .An increase in bank rate discourages borrowing by the businessmen and the consumers resulting in fall in inflation . 2)Sale of Government Securities :The Central Bank sells the Government Securities to the public, in the open markets, to withdraw the purchasing power and to control money supply of the households and businesshouse. 3)Cash Reserve Ratio: Cash Reserve Ratio is the ratio pf cash to total deposit liability of banks held with the central bank. A rise in CRR means lesser available of credit through the banking system to restrict purchase powers.