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Inflation: Impact On Economy

This document discusses inflation and its impact on the economy. It defines inflation as a sustained increase in the general price level over time which corresponds to a decrease in the purchasing power of money. The document outlines different types of inflation including creeping, open, galloping, and hyperinflation. It also discusses causes of inflation including demand-pull and cost-push factors. The effects of inflation are explained at both micro and macro levels. Finally, the document lists some measures that can be taken to control inflation including monetary, fiscal, and other non-monetary policies.

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103 views11 pages

Inflation: Impact On Economy

This document discusses inflation and its impact on the economy. It defines inflation as a sustained increase in the general price level over time which corresponds to a decrease in the purchasing power of money. The document outlines different types of inflation including creeping, open, galloping, and hyperinflation. It also discusses causes of inflation including demand-pull and cost-push factors. The effects of inflation are explained at both micro and macro levels. Finally, the document lists some measures that can be taken to control inflation including monetary, fiscal, and other non-monetary policies.

Uploaded by

nileshmishra31
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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INFLATION

Impact on Economy

Presented by: Sub: Economic


NILESH MISHRA Prof: G K Kalkoti
SMBA-15 FEB:2011
Key Points
• Introduction
• Definition
• Types of Inflation
• Causes of Inflation
• Effects of Inflation
• Measures to Control
Inflation
INTRODUCTION

SITUATION OF RAPID
GENERAL INCREASE
IN PRICE LEVEL

DECLINE IN THE
VALUE OF MONEY
DEFINITIONS
 “Inflation is too much money chasing to few goods.”
– Coulbourn
 “Inflation occurs when the general level of prices and
cost is rising.” – Prof. Samuelson
 “Inflation is the process of price increase.”
– Prof. Rowan
Thus , Inflation refers to –
“a rise in the general price level and a corresponding
fall in the value of money over a period of time.”
TYPES OF INFLATION

Open Inflation

Galloping Inflation
Suppressed Inflation

Hyper Inflation
Creeping Inflation
CAUSES OF INFLATION
• Demand – Pull Inflation
This theory can be summarized as "too much money chasing
too few goods". In other words, if demand is growing faster
than supply, prices will increase.

• Cost – Push Inflation


When companies' costs go up, they need to increase prices to
maintain their profit margins. Increased costs can include
things such as wages, taxes, or increased costs of imports .
CAUSES
CAUSESOF
OFINFLATION
INFLATION
Factors Affecting Prices on Factors Affecting Prices on the
Supply Side –
the Demand Side –
• Increase in money supply
• Rapid Growth of • Erratic Agricultural Growth
Population. • Inadequate Rise in Industrial
Production
• Rise in Incomes. • Hoarding
• Mounting Government • Agriculture Price Policy of the
Expenditure. Government
• Rise in Administered Prices
• Deficit Financing • Heavy Taxation
• Role of Black Money • Exports and Imports
EFFECTS OF INFLATION
EFFECTS OF INFLATION
Micro: On Individual Macro: On Economy

• Real income declines • Uncertainty


• Wealth value declines • Long-terms commitments
down
• Income redistribution
• Speculation increases
causes social tension
• Nominal pay increases
• Higher tax bracket
• Buy existing goods hoping
price will increase
MEASURES TO CONTROL INFLATION

These are the following measures taken to control


inflation
1) Monetary Measures
2) Fiscal Measures
3) Other Non-monetary Measures
INFLATION RATE IN INDIA
Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
-
2010 16.22 14.86 14.86 13.33 13.91 13.73 11.25 9.88 9.82 9.7 8.33
2009 10.45 9.63 8.03 8.7 8.63 9.29 11.89 11.72 11.64 11.49 13.51 14.97
2008 5.51 5.47 7.87 7.81 7.75 7.69 8.33 9.02 9.77 10.45 10.45 9.7
Thanks for your
attention!

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