1) How inflation can be prevented and controlled?

Is inflation good or
bad? Inflation can be controlled by:
a) Monetary method: In monetary policy, the central bank increases rate of
interest on borrowings for commercial banks. As a result, commercial banks
increase their rate of interests on credit for the public. In such a situation,
individuals prefer to save money instead of investing in new ventures. This
would reduce money supply in the market, which, in turn, controls inflation.
Apart from this, the central bank reduces the credit creation capacity of
commercial banks to control inflation.
b) Fiscal method: There are two component of fiscal method which are
government revenue and government expenditure. In fiscal policy, the
government controls inflation either by reducing private spending or by
decreasing government expenditure, or by using both. It reduces private
spending by increasing taxes on private businesses. When private spending is
more, the government reduces its expenditure to control inflation. However,
in present scenario, reducing government expenditure is not possible because
there may be certain on-going projects for social welfare that cannot be
postponed.
What is the purpose of Economy in the building of a nation? What are various types
of an economics system in India?
Economic development is a critical component that drives economic
growth in our economy, creating high wage jobs, facilitating an improved
quality of life and helping in building a nation. these points shows that the
economy plays a good role in the building of a nation:

 Job creation- Economic developers provide critical assistance and

information to companies that create jobs in the economy. It helps to
connect the new market and existing companies with the resources
and partners they need to expand. As a result, the employment of the
nation fulfil and it boosts the lifestyle of the community. So the nation
experiences the overall development.
 Industry diversification - A core part of economic development works
to diversify the economy, reducing a region’s vulnerability to a single
industry. It plays an important role in creating technologies, sciences,
healthcare, aviation, aerospace, defence, advanced manufacturing and
business services. So it helps to build the fundamental infrastructure
of the nation and make the people stable to live in it.
 Business retention and expansion- a large percentage of jobs and
employments are developed by the expansion of the existing industry.
It boosts the economy of the nation and people.
 Increased tax revenue- governments can raise their funds by
increasing tax and revenue. The government implies some policy and
rules to promote the growth of the nation.
 Improved quality of life- Better infrastructure and more jobs improves
the economy of the region and raises the standard of living for its
 residents. So the economic development improves the nation
overall and also the individual’s lifestyle living in the country.
Various types of economic system in India are:

 Pure Market Economy: In the pure market economy, there is no

government involvement in the economic decisions. Here, the
consumers decide what shall be produced. Businesses shall determine
how the products will be produced and who buys the product.

 Pure Command Economy: In the Pure Command Economy, all the

resources are government owned. Here, one person or a group of
officials decide what products are needed. The government decides
who receives the products that are produced.

 Traditional Economy: The economy in the traditional economy is

largely shaped by the custom or religion. The customs and religion
determine the WHO, WHAT and HOW. For example – India is based
on a caste system that restricts the choice of occupation, meaning that a
social class is separated or made distinct on the basis of profession,
wealth or even hereditary rank.

 Mixed Economy: In the mixed system, the individuals own most of

the resource and it is them who determine how and what to
produce. Also, the government regulates the certain industries and
includes both the features of market and command economies.