Introduction:
Keynes and Milton Friedman together suggested three measures to control inflation.
Monetary Measures:
These measures are adopted by the Central Bank of the country. They are (i) Increase in Bank rate (ii) Sale of Government Securities in the Open Market (iii) Higher Cash Reserve Ratio and Statutory Liquidity Ratio (iv) Consumer Credit Control (v) Higher margin requirements (vi) Higher Repo Rate and Reverse Repo Rate.
Fiscal Mcasures: (Key̧nes)
The major anti-inflationary fiscal measures are (i) Reduction of Government Expenditure (ii) Public Borrowing (iii) Enhancing taxation.
Other Measures:
Short-term:
(i) Public distribution of scarce essential commodities through fair price shops (Rationing).
(ii) Import of basic goods.
Long-term:
(i) This requires accelerating economic growth through wage goods which directly affect price and the cost of living.
(ii) Some restrictions on present consumption may help in improving saving and investment which accelerates the rate of economic growth in the long run.

Based on speed:
Creeping Inflation (mild or moderate inflation):
(i) It is slow-moving and very mild.
(ii) The rise in prices is not seen but it is spread over a long period.
(iii) This inflation is not dangerous to the economy.
Walking Inflation (rolling inflation):
(i) Prices rises moderately and annual inflation is 3 % to 9 %.
Running Inflation:
(i) Price rises rapidly like a running horse at a speed of 10 % to 20 % per year.
Galloping inflation: (hyper inflation)
(i) Unmanagcably high inflation ratcs 20 % to 100 %.
Based on the inducement:
Currency inflation:
(i) The excess money supply in circulation causes rise in price level.
Credit inflation:
(i) When banks lend credit liberally, the money supply increases thereby rising prices.
Deficit induced inflation:
(i) Deficit budget which is financed through printing of currency by the Central Bank leads to price rise.
Profit induced inflation:
(i) When firms aim at higher profit, they fix price with higher margin. So prices rise.
Scarcity induced inflation:
(i) Scarcity of goods happens duc to fall in production, hoarding and black marketing. This also pushes up the price.
Tax induced inflation:
(i) Increase in indirect taxes like excise duty, custom duty and sales tax may lead to rise in price. This is also called taxflation.

n = pk (or) p = n / k
Where
(i) n is the total supply of money
(ii) p is the general price level of consumption goods
(iii) k is the total quantity of consumption units the people decide to keep in the form of cash. because it is measured in terms of consumer goods.
(iv) k is a real balance because it is in terms of consumer goods
(v) According to Keynes, peoples’ desire to hold money is unaltered by monetary authority. So, price level and value of money can be stabilized through regulating quantity of money (n) by the monetary authority.
(vi) Price level and value of money can be stabilized through regulating quantity of money (n) by the monetary allthority.
(vii) Later, Keynes extended his equation in the following form:
n = p (k + rk') or p = n/(k + rk')
Where,
(viii) n = total money supply
(ix) p = price level of consumer goods
(x) k = peoples' desire to hold money in hand (in terms of consumer goods) in the total income of them
(xi) r = cash reserve ratio
(xii) k' = community’s total money deposit in banks, in terms of consumers goods.
(xiii)Keynes assumes, k, k' and r as constant.
(xiv) Price level is changed directly and proportionately to money volume.

Marshall’s Equation
1. The Marshall equation is expressed as:
2. M = KPY the price level P = M/KY or the value of money = The reciprocal of price level is 1/P = KY/M the value of money (one rupee) = 2,000 units = (KY/M) = two units of goods, or Prices level P = (M/KY) = 1/2 = 0.50 paise per unit.
3. It is, therefore, clear that the value of money (its purchasing power) is found by dividing the total amount of goods, which the community wants to hold out of the total income (KY), by the amount of the supply of the money held by the public (M), and the price level (P) is found out by dividing the money supply (M) by the amount of goods which the community wants to hold (KY), as the price level is the opposite of the value of money.

P = \(\frac { MV+{ M }^{ 1 }{ V }^{ 1 } }{ T } \)
P = \(\frac { (1000\times 3)+(500\times 2) }{ 4000 } \)
= Rs. 1 Per good
Value of money (1/p) = 1
If the supply of money is double
P = \(\frac { (2000\times 3)+(1000\times 2) }{ 4000 } \)
= Rs. 2 Per good
Value of money (1/p) = 1/2
Thus, when money supply in doubled, i.e., increases from Rs. 4000 to 8000, the price level is doubled. i.e., from Re. 1 per good to Rs. 2 per good and the value of money is halved, i.e., from 1 to 1/2.
P = \(\frac { (500\times 3)+(250\times 2) }{ 4000 } \)
= Rs. 1 Per good
Value of money (1/p) = 1/2
Thus, when money supply is halved, i.e., decreases from Rs. 4000 to 2000, the price level is halved, i.e., from 1 to 1/2, and the value of money is doubled, i.e., from 1 to

(i) First, in an advanced and more important an evolving-financial system, it was not possible to define the tock of Money in an unambiguous way.
(ii) At least there were a number of different but equally valid definitions of the money supply and there was no strong reason for choosing one in preference to any other.
(iii) As we have seen, money can be defined either narrowly or broadly.
(iv) However, there are or have been within the some institutional context a number of different definitions of the money supply.
(v) The definitions change frequently as does the popularity of one measure over another which partly illustrates the difficulty in trying to pin down the concept.

Keynes and Milton Friedman together suggested three measures to prevent and control of inflation.
(1) Monetary measures,
(2) Fiscal measures (J.M. Keynes) and
(3) Other measures.
1. Monetary Measures:
These measures are adopted by the Central Bank of the country. They are
(i) Increase in Bankrate
(ii) Sale of Government Securities in the Open Market
(iii) Higher Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR)
(iv) Consumer Credit Control and
(v) Higher margin requirements
(vi) Higher Repo Rate and Reverse Repo Rate.
2. Fiscal Measures:
Fiscal policy is now recognized as an important instrument to tackle an inflationary situation. The major anti-inflationary fiscal measures are the following: Reduction of Government Expenditure and Public Borrowing and Enhancing taxation.
3. Other Measures:
These measures can be divided broadly into short-term and longterm measures.
(i) Short-term measures can be in regard to public distribution of scarce essential commodities through fair price shops (Rationing). In India whenever shortage of basic goods has been felt, the government has resorted to import so that inflation may not get triggered.
(ii) Long-term measures will require accelerating economic growth especially of the wage goods which have a direct bearing on the general price and the cost of living. Some restrictions on present consumption may help in improving saving and investment which may be necessary for accelerating the rate of economic growth in the long run.

Money Supply in India
Money supply is a stock variable. RBI publishes information for four alternative
measures of Money supply, namely M1, M2, M3 and M4.
M1 = Currency, coins and demand deposits
M2 = M1 + Savings deposits with post office savings banks
M3 = M2 + Time deposits of all commercial and cooperative banks
M4 = M3 + Total deposits with Post offices.
M1 and M2 are known as narrow money
M3 and M4 are known as broad money
Determinants of Money Supply
1. Currency Deposit Ratio (CDR); It is the ratio of money held by the public in currency to that they hold in bank deposits.
2. Reserve deposit Ratio (RDR); Reserve Money consists of two things (a) vault cash in banks and (b) deposits of commercial banks with RBI.
3. Cash Reserve Ratio (CRR); It is the fraction of the deposits the banks must keep with RBI.
4. Statutory Liquidity Ratio (SLR); It is the fraction of the total demand and time deposits of the commercial banks is the form of specified liquid assets.

BARTER SYSTEM
(i) Exchange of goods for goods was known as “Barter Exchange” or “Barter System”.
(ii) In a barter system, the commodities and services were directly exchanged for other commodities and services.
(iii) Goods like furs, skins, salt, rice, wheat, utensils, weapons, etc. were commonly used as money.
METALLIC MONEY
(i) Under metallic standard, some kind of metal either gold or silver is used to determine the standard value of the money and currency.
(ii) Standard coins made out of the metal are the principal coins used under the metallic standard.
(iii) These standard coins are full bodied or full weighted legal tender.  Their face value is equal to their intrinsic metal value.
GOLD STANDARD
(i) Gold Standard is a system in which the value of the monetary unit or the standard currency is directly linked with gold.
(ii) The monetary unit is defined in terms of a certain weight of gold.
SILVER STANDARD
(i) The silver standard is a monetary system in which the standard economic unit of account is a fixed weight of silver.
(ii) The silver standard is a monetary arrangement in which a country’s Government allows conversion of its currency into fixed amount of silver.
PAPER CURRENCY
The paper currency standard refers to the monetary system in which the paper currency notes issued by the Treasury or the Central Bank or both circulate as unlimited legal tender.
PLASTIC MONEY
(i) The latest type of money is plastic money.
(ii) Plastic money is a term that is used predominantly in reference to the hard plastic cards used every day in place of actual bank notes.
(iii) Plastic money can come in many different forms such as Cash cards, Credit cards, Debit cards, Pre-paid Cash cards, Store cards, Forex cards and Smart cards.
CRYPTO CURRENCIES
Decentralised crypto currencies such as Bitcoin now provide an outlet for Personal Wealth that is beyond restriction and confiscation.

(i) Currency Inflation:
The excess supply of money in circulation causes rise in price level.
(ii) Credit Inflation
When banks are liberal in lending credit, the money supply increases and thereby rising prices.
(iii) Deficit Induced Inflation:
The deficit budget is generally financed through printing of currency by the Central Bank. As a result, prices rise.
(iv) Profit Induced Inflation:
When the firms aim at higher profit, they fix the price with higher margin. So, prices go up.
(v) Scarcity Induced Inflation:
Scarcity of goods happens either due to fall in production (e.g. farm goods) or due to hoarding and black marketing.
(vi) TaxInducedInflation:
(1) Increase in indirect taxes like excise duty, custom duty and sales tax may lead to rise in price.
(2) This is also called taxflation.

(i) Savings done in terms of commodities were not permanent.
(ii) With the invention of money, this difficulty has now disappeared and savings are now done in terms of money.
(iii) Money also serves as an excellent store of wealth.
(iv) Money can be easily converted into other assets such as land, machinery, plant etc.
(v) The modern money - economy has greatly facilitated the borrowing and lending processes.
(vi) In other words, money now acts as the standard of deferred payments.
(vii) The field of exchange also went on extended to distant lands.
(viii) It is therefore, felt necessary to transfer purchasing power from one place to another.