I have 1Gb ram  and the inactive ram keeps on increasing.

Hi , I ugraded my ram to 1Gb, however inactive ram increases even after closing applications. Seems that a restart will free more memory. Does the Mac OS automatically free inactive memory to free memory when applications are closed. Some time the inactive memory increases until free memory is reduced and Mac OS slows down. Is this normal?

Have a look at this page, it might answer a few questions.
Mac OS X: Reading system memory usage in Activity Monitor

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