Suppose you are RBI governor and inflation happen then what do you do?
Answers (2)
Increase interest rates.
One method of controlling inflation is through a contractionary monetary policy. The goal of a contractionary policy is to reduce the money supply within an economy by decreasing bond prices and increasing interest rates. This helps reduce spending because when there is less money to go around, those who have money want to keep it and save it, instead of spending it. It also means that there is less available credit, which can also reduces spending. Reducing spending is important during inflation, because it helps halt economic growth and, in turn, the rate of inflation.
You need to study at mises.org and fee.org until you understand inflation. Inflation does not happen, it is created. You have to have a central bank controlling the money, and inflation is the central bank's only function. Inflation is creation of unbacked currency.
There are other causes of a rise in prices, sloppily called inflation, but they are in fact natural market forces. Only phony money is susceptible to inflation. The USA had no inflation for 115 years, until the creation of the Federal Reserve Bank. None zip zero nada goose egg. In 1913 the Federal Reserve Act was passed and the immediate result was the roaring twenties, followed by the great depression as Hoover tried to restore honest money.
You can read a series of historical essays by Howard Katz at www.shtfplan.com/category/howard-katz
and
www.gold-eagle.com/authors/howard-s-katz