INFLATION

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• •Inflation is a rise in the general (or average) level of prices of goods and services in an economy over a period of time. –A trend, not a one-time event –A rise in most, if not all, prices over time
• When the general (or average) price level rises, purchasing power decreases and our currency buys fewer goods and services.

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• In a fiscal policy, the government controls and adjusts the amount of money to spend and keeps the tax rates leveled as well. Fiscal policy has to monitor the nation's economy and tries to keep the economy in shape. This policy has a great influence on the macroeconomic conditions. It is closely related to the monetary policy.

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• Fiscal policy, there are types of people called regulators who attempt to improve unemployment rates, control inflation, stabilize business cycles and influence interest rates so they can keep the economy controlled. In a recession, the government might lower tax rates to try to bring up the economy. More spending can lead to a stable economy but too much spending can lead to an increase in inflation.

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• Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.

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• Further goals of a monetary policy are usually to contribute to economic growth and stability, to low unemployment, and to predictable exchange rates with other currencies. Monetary economics provides insight into how to craft optimal monetary policy.

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• Monetary policy is referred to as either being expansionary or contractionary, where an expansionary policy increases the total supply of money in the economy more rapidly than usual, and contractionary policy expands the money supply more slowly than usual or even shrinks it.

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• Monetary policy differs from fiscal policy, which refers to taxation, government spending, and associated borrowing.