2. The overall general upward price movement of
goods and services in an economy (often
caused by a increase in the supply of money),
usually as measured by the Consumer Price
Index and the Producer Price Index.
Over time, as the cost of goods and services
increase, the value of a dollar is going to fall
because a person won't be able to purchase as
much with that dollar as he/she previously
could.
3. While the annual rate of inflation has
fluctuated greatly over the last half century,
ranging from nearly zero inflation to 23%
inflation,
the actively tries to maintain a specific rate of
inflation,
which is usually 2-3% but can vary depending
on circumstances. opposite of deflation.
4. Economic Situation of continuously rising
Price level and the falling value of money.
According to Prof. Rowan,
“ Inflation is the Process of Price Increase.”
Harry johnson defines inflation as a sustained
rise in Prices.
Crowther Defines “inflation as a state in which
the value of money is falling i.e. Prices are
rising”
5. Continuously Rising Price Trend, whether it is
measured through wholesale Price Index (WPI)
or Consumer Price Index (CPI)
The money Supply is in excess of requisite
Production and exchange needs of the
economy.
There is over expansion of credit by the banks.
There is a lack of financial discipline on the
part of the government.
6. A large number of commodities are in short
supply.
The rate of return of speculative hoarding of
commodities, Precious metals like gold and
silver and investments in immovable
Properties.
Interest rates are Higher
Labour Unrest,Strikes,lock-outs etc. Rising
labour costs
Higher indirect taxes imposed by the
government.
8. Means Low Inflation/Reasonable/Fair
It is mild and tolerable form of Inflation
It occurs when Prices are rising slowly
When the rate of Inflation is less than 10 per cent
annually.
It means Price level rising with a limit of 4 per
cent per annum.
9. There is a single digit inflation rate (less than
10 per cent )annually.
It does not disrupt the economic balance
It is regarded as stable inflation in which the
relative prices do not get far out of line.
People’s expectations remain more or less
stable under moderate inflation.
Under low inflation rate the real interest rate is
not too much low or negative so many can
serve its role as a store of value without
difficulty.
10. When the movement of Price accelerates
rapidly, running inflation emerges.
Running inflation may record more than 100
per cent rise in Prices over a decade.
Therefore when Prices rise by more than 10 per
cent a year , here running inflation occurs.
Galloping Inflation is really a serious Problem
and it causes economic distortions and
disturbances.
11. “When Prices are rising at double or triple digit
rates of 20,100or 200 per cent a year, the
situation may be described as galloping
Inflation.”
- By Samuelson
12. In this type of Inflation Prices rise every
movement
There is no limit to the height to which Prices
might rise.
It is a Out of control inflation with prices going up
day-by-day.
In quantitative terms, when Prices rise over 1000
per cent in a year it is called a hyper-inflation.
13. It represents the most Pathetic deterioration in
People’s Purchasing power.
It is apparently generated by a massive fiscal
dislocation
It is amplified by wage Price spiral
The velocity of circulation of money increases
very fast
The real wages tend to decline fast
The structure of relative prices of goods
become highly unstable.
14. Over expansion of money supply
Expansion of bank credit
Deficit financing
Ordinary Monetary factors:
-High non development expenditure
-Huge Plan investment
-Black money
-High Indirect taxes
15. Non monetary Factors:
-A High Population growth
-Natural calamities and bad
weather condition
-Speculation & hoarding
-High Prices of Imports
-Monopolies
-Underutilization of resources
16. Effect on Production
Distributional effect
Effects on consumption and Welfare
Other Economic Effects:
Deterioration in savings
Distortion of the budget
Disturbance in Planning
Lowering of international competitiveness
Distortion of the exchange rate
Social and Political consequences of inflation
17. Question:
Find out the Current Inflation Rate of INDIA.
In which Type of Inflation the Indian Inflation
rate
falls.
Question:
Suggest the measures to recover Inflation?