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TABLE OF CONTENTS INTRODUCTION 9 1.DEFINITION OF INFLATION 10 2.HISTORY OF INFLATION 10 3.MODERN DAY MEANING OF INFLATION 10 4.CONSUMER PRICE INDEX 11 5.INFLATION RATE 12 6.CAUSES OF INFLATION 14 7.EFFECTS OF INFLATION 15 8.CONTROLLING INFLATION 15 CONCLUSION 16 REFERENCES 20 INTRODUCTION The purpose of this project is to clearly define INFLATION, identify its causes and effects and the ways of effectively controlling it. This assignment is designed to provide clear understanding of what inflation is. Further the essay will outline the causes and effects of inflation in the economy as a whole and will identify measures on how the government can influence and effective control inflation to the advantage of the state economy. 1.DEFINITION OF INFLATION In Economics, Inflation is a rise in the general level of prices of goods and services in economy over a period of time. (Michael Burda and Charles Wyplosz(1997), Macroeconomics: A European text, 2nd ed., p. 579 (Glossary) 2.HISTORY OF INFLATION The origin of Inflation dates back to the time when gold was used as the purchasing medium in trading goods. It is a term which was referred to a condition of currency. It was originally referred to as the devaluation of the currency. The best example to show this devaluation is when a ruler or a king collects gold from his people and subsequently melt these down then mix it with other semi-precious metals such as silver, copper or lead to increase the coins in circulation without the need to increase the amount of gold to produce them. And when the ruler or king adopts this practice, the supply of coins in circulation would increase but will ultimately decrease the value of the coin. Once the value of the coin declines, it would increase the number of coins required to exchange for goods or services. Applying the basic concept of the Law of Supply and Demand in Economics, this would mean that as the value of a coin decreases due to a genero