The other day, I asked one of my friends who happens to be an expert in economics that how is inflation controlled by varying the interest rates and ended up enduring incomprehensible dialogs over an extended dinner.So, as far as I recall he went on like......
Him: Well, by inflation do you mean the inflation rate , the RPI or the CPI?
Me: (Sheepishly) What have the communists got to do with this? I asked in a completely economic sense.Why are you giving it a political angle?
Him: (With an amused smile) I meant the Retail Prices Index and the Consumer Prices Index (which I assumed to be the Communist Party of India).
Me: I asked such a simple and straight question and you are dishing out jargon?
Him: Now these are common place terms .They are just the terms used for quantitative representation of inflation in India, UK and US.
Me: See, what I understand by inflation is a general rise in prices across the economy.Now,
will you tell me in simple and comprehensible words that how exactly is that inflation
controlled by varying interest rates?
Him:See as long as you don't understand the terms in which inflation is expressed , how do you think that you'll understand the interrelationship between two economic concepts?
Me: Well, is there something like an intrarelationship of an economic concept with itself that you have to use "interrelationship".(I swear I had asked this question very earnestly.)
Him: Oh! Come on. Those spoofs of yours will lead you nowhere. Now do you want me to tell you about it seriously?
Me: Please! Go on.
Him:So inflation which obviously means a rise in general price of goods or services or alternately an increase in money supply can be expressed in many ways like
CPI(Consumer Price Index, this came after the request for it)
COLI(Cost of Living Index)
PPIs(Producer Price Indices)
CPIs(Commodity Price Indices, and I thought that I new the full form)
TII(True Inflation Index)
Well, after a while I lost track as he talked about something like Keynesian View, Austrian Theory ,Monatrist view and god knows what not.
Well, I made my cellphone ring and left him with his concepts and dinner.....thinking, "Chhodo yaar wikipedia se padh loongi."