India's central bank raises key interest rates by quarter point to contain inflationOne of a government’s macroeconomic goals is price stability and an attempt to maintain a low and stable rate of inflation. Inflation is defined as a persistent increase in the average price level of the economy. Inflation is measure through the Consumer Price Index. It indicates a fall in the value of money when the economy is at or approaching the point of full employment. This article concerns itself with India’s decision to increase interest rates in an effort to suppress levels of inflation. Inflation can be a cause of various economical changes such as increasing aggregate demand in a country or an increase in the cost of production of goods. Low interest rates in a country encourage consumers to buy more, eventually leading to a greater demand than supply; causing inflated prices
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