Sylvia f.

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K J Somiaya Comprehensive College of education. PPT presentation of CAP

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Sylvia f.

  1. 1. K J SOMAIYA COMPREHENSIVE COLLEGE OF EDUCATION, TRAINING &RESEARCH<br />TOPIC : Inflation Trends & Its Effects.<br />B.ED 2010 - 2011<br />By Silvia Fernandes<br />Sub- Economics<br />Roll No - 15<br />STD – 1X<br />
  2. 2. INFLATION<br />
  3. 3. <ul><li>Definition of Inflation.
  4. 4. Whole Price Index.
  5. 5. Consumer Price Index.
  6. 6. Trends in Inflation.
  7. 7. Impact of Inflation.
  8. 8. Effects of Inflation.</li></ul>CONTENT<br />
  9. 9. What is Inflation?<br /><ul><li>Inflation is defined as a sustained increase</li></ul> in the general price level of goods<br /> and services.<br /><ul><li>As inflation rises, the value of currency goes </li></ul> down. Thus the purchasing power of the <br /> currency i.e. the good & services that can be<br /> bought in a unit of currency too goes down.<br />
  10. 10. How is inflation measured?<br /><ul><li>WPI ( wholesale Price Index ).
  11. 11. India – the only major country uses </li></ul> (1st published in 1902).<br /><ul><li>What is WPI?
  12. 12. The WPI number is a weekly measure of wholesale</li></ul> price movement for the economy.<br />
  13. 13. Indian Government constructed its present WPI way back in 1993-94 (1993-94 series replacing 1981-82 bases) by making a basket of 435 commodities.<br />The 100 point index is subdivided into three groups.<br />WPI Indian Example<br />
  14. 14. 1. Primary Articles (98 items) – 22.02%.<br /> Food articles, non-food articles, minerals.<br />2. Fuel, Power, Light and Lubricants <br /> (19 items) – 14.23%.<br />3. Manufactured Products (318 items)-63.75%.<br /> Food products<br /> Beverages, tobacco & tobacco products<br /> Textiles……..etc.<br />Major Groups<br />
  15. 15. WPI Monthly Inflation(Rate of inflation Y-Y in %)<br />
  16. 16. Consumer Price Index (CPI)<br /><ul><li>A measure of the average price of consumer</li></ul> goods and services purchased by households.<br /> ( 1st published in 1970 ).<br /> CPI indicates the change in purchasing power of the consumer.<br /><ul><li>CPI for Industrial workers (CPI-IW)
  17. 17. CPI for Agricultural Labourers/rural labourers (CPI-AL/RL)
  18. 18. CPI for urban Non-Manual Employees (CPI-UNME)
  19. 19. Published on monthly basis.</li></li></ul><li><ul><li>India uses the WPI to calculate the inflation rate.
  20. 20. Most developed countries use the CPI to calculate inflation as this actually means the increase in price that a consumer will ultimately have to pay for.
  21. 21. Presently 145 countries practice CPI compared to 27 practicing WPI.</li></ul>Measure of Inflation<br />
  22. 22. The current CPI is 218.71<br />
  23. 23. Why is Inflation bad?<br /><ul><li>Unanticipated inflation is bad because it makes the economy behave like a giant casino.
  24. 24. Gains & losses
  25. 25. Value of money
  26. 26. Resources
  27. 27. Unanticipated inflation leads to :</li></ul> Redistribution of income, borrower & lender<br /> Too much or too little lending or borrowing.<br />
  28. 28. The Economic Impacts of Inflation<br /><ul><li>Redistribution of income and wealth among different groups.
  29. 29. Distortion in relative prices and outputs of different goods, or sometimes in output & employment for the economy as a whole.</li></li></ul><li>INFLATION RATES<br />
  30. 30. Effects of Inflation<br /><ul><li>Inefficient market.
  31. 31. Hoarding of Commodities
  32. 32. Discourages investment & saving
  33. 33. Higher income tax rates.
  34. 34. Increase imports and reduced exports.</li></ul>Examples :<br /> Increase in the price of wheat,rice,sugar,<br /> CNG etc.<br />
  35. 35. Evaluation<br />What do you mean by Inflation?<br />How is Inflation calculated?<br />What do you mean by CPI?<br />How does India calculate the Inflation rate?<br />What do you mean by WPI?<br />What are the effects of Inflation?<br />
  36. 36. ANSWERS<br />Inflation is general increase in price of goods and services.<br />Inflation measured by WPI and CPI.<br />It is the average price of consumer goods and services purchased by households.<br />India uses the WPI to calculate the inflation rate.<br />It is the weekly measure of wholesale price movement for the economy.<br />Its effects are inefficient market, hoarding of Commodities, discourages investment & saving, higher income tax rates, increase imports and reduced exports.<br />

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