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Inflation..

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Inflation..

  1. 1. INFLATION “Inflation is always and everywhere a monetary phenomenon…” -Milton Friedman
  2. 2. INDEX 1.INTRODUCTION 2.CAUSE OF INFLATION 3.TYPE OF INFLATION 4.MEASUREMENT OF INFLATION 5.IMPORTANT FACTS 6.INFLATION IN INDIA
  3. 3. INTRODUCTION • Inflation is an increase in the overall level of prices. • Inflation is not an increase in the price of a specific good or service relative to the prices of other goods and services.
  4. 4. CAUSES OF INFLATION • DEMAND PULL INFLATION • COST PUSH INFLATION • STRUCTURAL INFLATION
  5. 5. • DEMAND PULL INFLATION Demand-pull inflation is asserted to arise when aggregate demand in an economy outpaces aggregate supply. It involves inflation rising as real gross domestic product rises and unemployment falls, as the economy moves along the Phillips curve. This is commonly described as "too much money chasing too few goods.“ • COST PUSH INFLATION Cost-push inflation is a type of inflation caused by substantial increases in the cost of important goods or services where no suitable alternative is available. It stands in contrast to demand-pull inflation. • STRUCTURAL INFLATION Structural Inflation. Inflation that occurs because a government pursues an excessively loose monetary policy. That is, if a central bank prints too much money or keeps interest rates too low for too long, the value of each unit of currency drops more than it would simply from increased demand.
  6. 6. • CREEPING INFLATION-Creeping or mild inflation is when prices rise 3 percent a year or less. According to the Federal Reserve, when prices increase 2 percent or less it benefits economic growth. This kind of mild inflation makes consumers expect that prices will keep going up. That boosts demand. Consumers buy now to beat higher future prices. That's how mild inflation drives economic expansion. For that reason, the Fed sets 2 percent as its target inflation rate. • WALKING INFLATION-This type of strong, or pernicious, inflation is between 3-10 percent a year. It is harmful to the economy because it heats up economic growth too fast. People start to buy more than they need, just to avoid tomorrow's much higher prices. This drives demand even further so that suppliers can't keep up. More important, neither can wages. As a result, common goods and services are priced out of the reach of most people. TYPE OF INFLATION
  7. 7. GALLOPING INFLATION-When inflation rises to 10 percent or more, it wreaks absolute havoc on the economy. Money loses value so fast that business and employee income can't keep up with costs and prices. Foreign investors avoid the country, depriving it of needed capital. The economy becomes unstable, and government leaders lose credibility. Galloping inflation must be prevented at all costs. HYPER INFLATION-when prices skyrocket more than 50 percent a month. It is very rare. In fact, most examples of hyperinflation have occurred only when governments printed money to pay for wars. Examples of hyperinflation include Germany in the 1920s, Zimbabwe in the 2000s, and Venezuela in the 2010s. The last time America experienced hyperinflation was during its civil war.
  8. 8. MEASUREMENTS OF INFLATION • CPI-A Consumer Price Index measures changes in the price level of a weighted average market basket of consumer goods and services purchased by households.It is usually calculated and reported by the Bureau of Economic Analysis and Statistics of a country on a monthly and annual basis. • WPI-The Wholesale Price Index (WPI) is the price of a representative basket of wholesale goods and measure On wholesale sale price.
  9. 9. REFLATION-Reflation is the act of stimulating the economy by increasing the money supply or by reducing taxes, seeking to bring the economy back up to the long-term trend, following a dip in the business cycle. It is the opposite of disinflation, which seeks to return the economy back down to the long-term trend. DEFLATION-In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0%. REFLATION IMPORTANT FACT
  10. 10. INFLATION IN INDIA •Inflation rate in India was 5.05% as of May 2019, as per the Indian Ministry of Statistics and Programme Implementation. •Inflation rates in India are usually quoted as changes in the Wholesale Price Index (WPI), for all commodities •In India, CPI (combined) is declared as the new standard for measuring inflation (April 2014)
  11. 11. THANKS FOR WATCHING

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