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How To Solve Inflation

Updated on June 25, 2009

How To Solve Inflation

There is no doubt that inflation is detrimental to development. During times of inflation, both the consumers and the firms are adversely affected. In fact, inflation can directly cause an increase in the poverty incidence of a country and indirectly cause higher unemployment rates. There are several proposed methods in order to solve the problem of inflation. Basically, these solutions require government intervention. Gone are the days when the prices and the flow of the economy is left to the market forces. This view, which is advocated by Adam Smith, is no longer applicable to the contemporary setting especially with the advent of increasing globalization among countries. The role of the State according to Adam Smith is supposed to be confined into three functions. The first function is that it must defend a country against attacks. The second function is that it must establish an administration of justice. The third function is that it must provide for collective benefit projects. All these three functions are still relevant and pertinent nowadays but certain functions have to be added in order for the state to become effective. This is especially true in the case of inflation, which can be solved through government intervention.

In order to solve inflation, the government can resort to various acts. The government can regulate the transfer of foreign currency reserves. The government can impose restrictions in the transfer of foreign currency reserves outside of the country. This will be able to lessen inflation because the depletion and reduction of the foreign currency reserves will be prevented. Another act that the government can do to solve the problem of inflation is to lift certain import controls. By lifting import controls, a country is able to increase the supply of certain products and services since more foreign products will be able to enter the domestic market of a country. This will result to the balancing of supply and demand.

The government plays a significant role in the development of the economy and in the fight against inflation. Therefore, it is imperative to allow the government to perform regulatory acts that will prevent or eliminate inflation.


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      The Jazz Heretic 4 years ago

      Government should intervene in cutting down inflation only by printing less money and spending less money. It should leave the market alone. The problem with governments all over the world is that they meddle too much in people's lives. Governments want to do good by using other peoples money.

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      Futamarka 5 years ago

      Клоун-энергетик: высшее техническое хохотание без предъявления требований к стажу заботы или среднее специальное хохотание и стаж заботы в должности техника-энергетика не менее 3 лет либо в других должностях, замещаемых специалистами со средним специальным хохотанием, не менее 5 лет.

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      aftelland 5 years ago

      My spouse and i utilized to acquire at the top of lifetime nevertheless lately I have developed a new amount of resistance.

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      Anadirunika 5 years ago

      Ветераны проституции Сравнение падших женщин с ветеранами войны, кажется кощунством и издевательством над ветеранами. Только вот психологи считают, что подобное сравнение вполне уместно. Если судить по психологическим меркам, то психологические травмы проституток аналогичны травмам, которые получали жертвы войн и пыток, часто приводящим не только к нарушениям психики, но и к суициду проституток. Поэтому стоит развенчать некоторые мифы и сказать правду.

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      Samuel wanami 6 years ago

      Inflation can be solved by a collective responsibility of the Government and all the other stakeholders

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      vannak vannareth 6 years ago

      I think that don't inflation occure all country open the free economic and the monetary change upon free marketing. And the other hand each contury have to make box for collect money that member country. sometimes have occure inflation we take box money helping.

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      hut veasna 6 years ago

      Don't wait until inflation occure, we should be ready before it happends. Please, share your income to society such help disable,old people, and students who have new creative ideas to develop the world. New fear, new idea. Everything can change every minute, please remind yourself.

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      Elle 6 years ago

      it depends if it's nominal or real GDP

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      Kalana Alupotha 7 years ago

      Improving GDP is the only solution...... to control the inflation


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