Inflation

Concept of inflation

There should be a balance between supply of goods and services and money floating in the market

Money can have its core value like gold ,silver coin that have value when we melt it, or make jewellery , so  these type of coin have value without any governmental release . or money can have its face value like rupees or dollar paper note . Paper note have no core value but have face value because government releases it through its bank and assure you that note having a face value is able to buy that value .In India central bank is reserve bank of India

Reserve bank of India releases rupee notes and Government of India  releases coins

Inflation and deflation

When the supply of good is greater than supply of  money or money floating in system deflation occur. Means that price of goods will decrease .

And  When the supply of good is lesser than money floating in the system the price of goods will increase and inflation takes place.

 Generally positive inflation rate (1 %to 2 %) is maintained to  make economy increasing and for development.

Let  understand from an example

Assume there is only five apple in the system and government releases only 100 coins ,then one apple cost  is 20 coins. Next year apple production is good and 10 apple is produced that  year and government releases another 100 coins so  200/10=20 ,so one apple cost is 20 coins .in this year the apple price is same as previous year so no inflation and no deflation. Now the system have 200 coins floating , Next year apple production is  same as previous year i.e. 10 apple but government releases  another 100 coin and system money increases to 300 coins  so one apple cost is 300/10 =30  , so the price of apple increases from 20 to 30 this is inflation . Like wise when production increases and money floating is system is same  then price of goods decreases. In this way inflation and deflation takes place

In fact the existing system is very big  and quite complex

Inflation in India depends on food production and agriculture and is indirectly or directly affected by monsoon.

# Economy