Question

A policymaker wants to reduce inflation. In order to make an intelligent decision about how to do so, the policymaker: should use a simple rule: once inflation is gone, it will always be gone. should realize that inflation can be reduced without any costs. should find out if people are really better off as a result of the inflation. needs to know the causes of inflation, for example, the government's printing of too much money.

Answer 1

Answer:Inflation may either be caused by cost or Demand.

Explanation:Cost effect on inflation occurs when the total cost of production of essential commodities and major consumables is increased at unimaginable rates or propensities.The increase is indirectly pushed to the consumers in a higher price margin.It is conclusive to state,the higher price will have no choice than to weaken the value of the currency thereby creating an inflationary environment which adversely affect business,individuals income and cost of living.

Inflation can also be caused by increase in demand for certain commodities which are in short supply.The active demand for such commodities by the law of demand and supply will trigger price increase of such commodities which tend to also weaken the value of the local currency or reduced their purchasing power to buy more things.