1. T.MURUGAN
MBA (II YEAR)
DEPARTMENT OF MANAGEMENT STUDIES
MADURAI KAMARAJ UNIVERSITY
MADURAI-21

2.  Every one is familiar with the term inflation as
rising prices.
 This means the same thing as fall in the value
of money.
 Inflation is a monetary aliment in an economy
and it is defines by economists is so many
ways.

3.  According to COULBOURN defines it as,”too
much money chasing too few goods”.
 Keynes definition ,”inflation refers to a rise in
the price level after full employment is
reached”.

4.  Creeping inflation
 Walking inflation
 Running inflation
 Galloping inflation or hyper inflation

6. There are different Price Indices that can be used, the most popular are:
 Consumer Price Index (CPI) – measure the price of a selection of goods
and services for a typical consumer.
 Commodity Price Index – measure the price of a selection of
commodities with. It is a weighted index (in other words, some
commodities are more important than others in determining price
changes).
 Cost of Living Index (COLI) – measure the cost to maintain a constant
standard of living. In other words, what would it cost you from year to
year to live exactly the same.
 Producer Price Index (PPI) – measures the prices for all goods and
services at the wholesale level. It is like the consumer price index but it is
measuring the prices the producers have to pay.
 GDP Deflator – measures the prices of all goods and services (GDP).

7. Now in order to calculate the inflation between any
2 years we simply calculate the percentage rate
change. To calculate a percentage rate change the
formula is:
where F is the final value and I is the initial value.

8.  Inflation rate from 2011 to 2012: In this case the Final value is the index
value for 2012 which is 137. The initial value is the index value for 2011.
Therefore we plug in the values into the percentage rate change formula
to get:
this gives an inflation rate of july (15 days) approximately 3%.

9. A variety of policies have been used to control inflation.
 Monetary policy
 Fixed exchange rates
 Gold standard
 Wage and price controls
 Cost-of-living allowance