Explain why a government might want to reduce the rate of inflation in a country?
492698
First the term "Inflation" is generally the difference expressed as a percentage of the increase in value of everything except the currency of a country. The reverse to this it takes more money to buy anything.\n\nThe reason that governments go to lengths to reduce the rate of inflation of a country to as low as possible is that should inflation increase then an economic spiral starts with the population buying less then industry must respond by shedding jobs and investing less. This in turn affects investors and they reduce there exposure by selling their investments then if unchecked inflation rises, the spiral goes around again and again.\n\nThis spiral starts by producing what is called a recession and then as inflation increases you enter an economic depression which puts stress,poverty and starvation on the population and the weakest are the most affected.\n\nWhen inflation is run away or "rampant" either a turn around by extremely conservative measures and years of recovery or an injection of funds by neighboring states to bring the value of the currency back to the value of everything else in the country at the cost of massive debt.\n\nGetting back to high inflation, if left for too long becomes what is called hyperinflation then strange things like you wait half a day in a line to just get a cabbage or need a wheelbarrow of money just to buy a loaf of bread and all of a sudden a new currency printed to manage the old. This aggravates the general population so much and generally leads to someone getting the blame (government), then civil instability followed by violence and revolt.
622944
Why because if the government just printed more money then inflation would occur and it would cost 10 million dollars to buy bread.  Check out what happened to Germany during WWII.
1179600
Because the governments have chosen to peg or fix the currency at that price for a bit of financial stability.  As long as they can hold the peg, it should be steady.
363756
A country's central bank controls the currency.  If a country were to just print out more money (too much money) they will end up destabilizing the currency, meaning too much money chasing too few goods.  This will cause high inflation and will then cause more money to be printed and on and on.  Additionally world markets will see what is going on and will take their money out causing more damage to that country.  Just printing out more currency is not the answer, just ask some South American countries, they learned that the hard way.
152394
the main cause of inflation is the government increasing the supply of money. But it is a little more complicated than that.  When the price of oil increases, the costs of everything that depend on oil also increase, for example. That then causes an increase in prices charged to workers. Workers then demand increased wages to maintain their standard of living. Employers give them higher wages without too much fuss because they know that they can pass the increased costs on to consumers.  The government facilitates all of this by printing more money. The government loves inflation because they borrow a lot of money at fixed interest rates. If they can cause the value of the dollar, peso, pound, euro, or whatever to decline they do not have to pay back all of what they borrowed. A neat trick and used successfully by all governments. Inflation also increases tax revenue.  If a person buys a share of stock for $100 and ten years later sells it for $200, he has to pay taxes on $100.  But if the inflaction rate is 4%, he actually made only $52. So the government makes out like a bandit again. The same goes for all borrowers.  \n\nOn the other hand those who lend money are loosers. Consequently, inflation tends to dry up the sources of capital. It is better to spend your money than to save it. Hence, that is why people have not been saving money since 1999, because Greenspan reduced the interest rate to 0. People are not as stupid as the government is.
508214
The Reserve Bank of a country usually will decide how much money is in circulation.\n\nThis is governed by the interest rate it will charge for the money that is on offer for borrowers which can be other banks who will in turn lend it to other borrowers.\n\nIf the inflation is likely to increase then the supply of money is restricted by increasing the interest rate so that the borrowers will not borrow or borrow less.\n\nConversely to kick start the economy the interest rates are decreased so that the companies will borrow and start the businesses and promote economic growth.
910859
Could be many reasons.\n1 could be the De minimis rule for EU fundings.\n2....\n3...
431453
b/c that will cause massive inflation (everything will cost more b/c ppl will have more $ to spend, stores will charge more and workers will work only for more $ b/c why work for 5$ if u can easily get the 5$ b/c they printed it.) also, the coutnry as a whole is in debt to other nations. if we print more money, they'll want more of it b/c of the inflation. Theyre not stupid.\n\nP.S. the person above me is an idiot
449181
It's because our standard of living is decreasing relative to other countries.  This is a result of a stupid government idea to save money which had to do with the rate of inflation (how quickly things increase in price).  The rate of inflation used to be based upon things like food, gasoline, electricity, clothing, and things like that - things necessary to survival.  In the late 90's, the government decided it needed to save money by not increasing people's pensions and pay scales because these things are "indexed" (fixed relative to) inflation.  So the government decided it would be a brilliant idea to not include the cost of gasoline, electricity, and fruit/vegatables in the rate of "core" inflation because they were "too volatile".\n\nAs a result of this, each year Canadian's expenses in necessary goods increases more than does their rate of pay, and so their standard of living decreases.  We will continue to decrease in ratings until something is done.\n\nFor more info on inflation, check out the link (includes what items are included in the calculations).
416789
A countries rate of exchange can change for numerous reasons but one topical reason could be the threat of 'terror'. Currency fluctuation work on the supply & demand theory. If no one is demanding (wants it) the currency, then the price will drop. This in turn means that if there is anything negative floating around about a country, then it is very likely that fewer people will want their currency (business & toursism - busniess is the greaterst consumer of international currency). Think of a country as a business and this makes more sense - a business with a lot of bad press or with a level of uncertainty will attract fewer customers/sales.\n\nMany countries still use the US Dollar as the international media of exchange but increasingly this depandance is being reduced as traders/business/Coutries increase their use of the Euro. This is having a real effect on the US economy and a reason that Mr Bush isn't a huge fan of Europe and it's enlargement.
1064871
It's dependent on the government for its authority, but it's more independent in its actual operations.  Normally, it's not a good idea for monetary policy and fiscal policy to strive for different things, but that' somewhat of the case in the president day.\n\nMost of the monetary policy is going towards controlling inflation by raising interest rates many times over the course of a few years.  Meanwhile, the fiscal policy is kind of stimulating the economy through increased spending and decreased taxes.  If they worked together, then there wouldn't be conflicting actions.
682265
And create an insane amount of inflation.  The amount of money doesn't keep the value of the dollar Static, it would devalue the dollar.  We might as well become a third world country at that point
384280
when government subsudizes a certain sector, that reduces the cost of production of the good. that leads to increase in world supply and price eventually falls, assuming demand does not change.
116657
Inflation is classically caused by rising interest rates.  When money is harder to borrow (higher rates), harder to come by, then goods and services end up rising in value in response.  Because people need to borrow (from credit and ARMS and whatnot), they are forced to charge more for whatever they are selling or performing.  So they begin to raise their prices, and everyone else needs to do likewise.  The best way to stop inflation, generally, is to lower the interest rate.
403181
It limits competition. Meaning people might have to pay more for less, because another country make the cheaper and better version of the product. Although it is used to help support the domestic economy.
857178
a bad business situation doesnt necessarily means like great depression. however it means the business is not doing good, may be low revenues, high costs, and other negative factors pushing the sharprices down.\n\nthe best policy depends on the situation, but most often montary policy is used. the goverment doesnt change tax rules and therefore fiscal policy is not very common now. however monetary policy is used more now, to correct inflation and other economical objectives by raising and reducing interest rates. so this suggest monetary policy is better and convenient for the govt.
512455
The government has many forms of taxes. The higher prices increase government tax income. This is a cash cow for the government.