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Inflation

In: Business and Management

Submitted By akshay2192
Words 2073
Pages 9
TH
E
ECONOMI
C
WEEKL
Y
September 23, 1961
Inflatio
n
No
t a Monetar y Phenomeno n ?
Promod
e
K
Mukherje e The cause o f inflation, according t o
Keith
B
Griffi
n
(Th
e
Economi
c
Weekly
.
Special
Number
1961
) lies i n the structura l imbalances i n a n economy
.
Whil e granting this, i t i s contended here that i t does not follo w that monetary policy has n o role t o play in combating inflation.
I
t i s not enough t o achieve a n overall balance between output and expenditure. Wha t i s importan t is to secure an increase in the output of basic consumption and investment goods. A well-conceived monetary policy is of crucial importance in discouraging outlay and consequent income creation in wrong directions.
Further,
an increasing proportion of the income generated in the process of development will go to augment bank deposits, thereby increasing the capacity o f the bank s t o create credit,
In
the absence of a restrictive monetary policy, a serious credit inflation may consequently ensue and distort the ideal relationship envisaged by
Griffin
between output and expenditure. Thus, a phenomenon not primarily monetary may ultimately become largely monetary in character.
ACCORDIN
G t o
M
r
Griffin
, infla - tio n result s
"i
f eithe r desire d con - sumptio n o f necessarie s i s greate r tha n th e suppl y o f thes e goods , o r i f non-esentia l consumptio n ou t o f surplu s plu s tota l investmen t ex - penditur e i s greate r tha n actua l sur - plus , o r i f desire d privat e inves t men t i s greate r tha n th e shar e o f saving s allocate d t o i t
b

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