Instead of asking about how to control deflation? Just go and explore in internet world, you will have a lot ways to control deflation. It is clear that deflation reduces the general price level which is due to decrease in output and employment. It is a set back to the rate of economic growth in the country. The government must take steps to correct the adverse situation.
There are a number of causes of deflation, but before talking about all these causes of deflation, it is also important to talk about deflation that what is deflation? How different authors define deflation: – Deflation is gradually decreased in the prices of general products and services and known as deflation. Different authors define the deflation in different words.
Today inflation has become the common problem of the world and almost every one talks about the root causes of inflation. It is clear that inflation is a matter of raising prices when the supply of goods and services is low than the demand for such items starts increasing. The increase in pricing is probably due to the increase in the supply of money than the production of goods and services. Thus it leads to inflation in the country. Increase in the supply of money is not only the single cause of inflation, there are a lot more causes of inflation, which directly or indirectly impact the prices.
To know exactly what the functions of commercial banks are? Firstly we should try to understand that what commercial bank is? Commercial Banks are those institutes which deal with the money and engaged in performing the routine activities of banking business. Commercial banks are primarily established to earn profit. It deals with the funds of other. It takes money from one person and lends to another. They give fixed amount of interest while talking money from others and give to needy people and take a fixed amount of interest which is higher than previous one. So difference between both of them is actually the profit of bank. Along with this borrowing and lending money, there are a lot more functions of commercial bank, which play a vital role in the development of country and also give a lot benefits to the general public.
If we could not deny the importance of money in business, then we can also never deny the importance of credit in business. Since the supply of money is the lifeblood of a borrowing economy, there are two sources which meet the capital requirements of the business. These are the savings of the people and commercial banks. Probably these Commercial Banks take the savings of money and borrowed them to the needy people as well as the businessmen.