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.

7.  Moderate Inflation
 Galloping Inflation
 Hyper Inflation

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?