The price stabilization is advocated on the basis of the following arguments

The price stabilization is advocated on the basis of the following arguments:

(i) Price instability leads to great disturbances in the economy and price stability ensures smooth functioning of the economy and creates conditions for stable economic growth.

(ii) Inflation and deflation representing cumulative rise and fall in prices respectively are both economi­cally disturbing and socially undesirable. They create problems of production and distribution.

(iii) Inflation is socially unjust because it redistributes income and wealth in favour of the rich.

(iv) Deflation leads to the reduction of income and output and cause widespread unemployment.

(v) Periods of price and business fluctuations, such as the hyper-inflation of 1923-24 and the Great Depression of 1929-33 have been the periods of great international upheavals, leading to World War II.

(vi) Price stability eliminates cyclical fluctuations and helps to promote business activity. It results in active and stable prosperity.

(vii) Periods of price stability enable money to perform its functions of (a) store of value and (b) standard of deferred payment smoothly.

(viii) Price stability leads to equitable distribution of income and wealth among various sections of the society.

(ix) Stability of price level promotes economic progress and economic welfare in the country.