Abstract
Inflation has been a burning issue throughout the centuries. The world is currently going through its biggest financial crisis since 1929. While certain countries including Greece and Ireland find themselves on the verge of bankruptcy, inflation seems to have been stabilized in the other parts of the globe. It appears that economists and governments have learned from the crisis of 1929 and have been able to use this information to control the current situation. However, inflation remains a controversial subject and there have been many schools of thought put forward such as those by Keynes, and the rational expectations theory. The question facing the how governments is how can they reduce or prevent inflation in the most effective manner? At this juncture, let us note that "the rate of inflation in an economy is the rate at which the general level of prices in that economy changes. It is the proportionate change in the general price level per unit of time". (J.S Flemming, 1975:5). In this essay, the main factors of inflation will be explained. Subsequently, its consequences will be discussed. Finally, the different ways to fight inflation will be analyzed.
