Every business has ‘fixed cost of production’ say minimum light bill, phone bill, office rent, staff salary etc. So, if prices keep falling and falling (say of Nano car), then car marker will suffer losses. He has no motivation to expand business. He wants to cut down his production costs, by firing some of the employees= less new jobs created= unemployment = social unrest.If prices of everything fall- then custom duty, VAT, excise duty, service tax- their collection will also decrease. Then government has less money to spend on education, healthcare, social sector, defense, law and order = poverty, disease, crime.
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Every business has ‘fixed cost of production’ say minimum light bill, phone bill, office rent, staff salary etc. So, if prices keep falling and falling (say of Nano car), then car marker will suffer losses. He has no motivation to expand business. He wants to cut down his production costs, by firing some of the employees= less new jobs created= unemployment = social unrest.If prices of everything fall- then custom duty, VAT, excise duty, service tax- their collection will also decrease. Then government has less money to spend on education, healthcare, social sector, defense, law and order = poverty, disease, crime.
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Explained: Monetary Policy, Rep, SLR, CRR, Qualitative Tools and thereby fight inflation and deflation. Inflation = price rise = bad for economy, you know that by common sense. But Deflation = price decrease = we can buy things at a lower price. Isn’t that good? Why is deflation bad for economy? Ans. <span>Every business has ‘fixed cost of production’ say minimum light bill, phone bill, office rent, staff salary etc. So, if prices keep falling and falling (say of Nano car), then car marker will suffer losses. He has no motivation to expand business. He wants to cut down his production costs, by firing some of the employees= less new jobs created= unemployment = social unrest. If prices of everything fall- then custom duty, VAT, excise duty, service tax- their collection will also decrease. Then government has less money to spend on education, healthcare, social sector, defense, law and order = poverty, disease, crime. by the way TERM meaning Does RBI want it? DEFLATION fall in the prices (and fall IN employment.) No. DISINFLATION Fall in the prices but without causing unemployment. yes (while fighting
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