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Inflation - Good or Bad?
 

Inflation - Good or Bad?

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    Inflation - Good or Bad? Inflation - Good or Bad? Presentation Transcript

    • INFLATION: Good for a Growing Economy Team 10 07927802 Avinav Goel 07927838 Varghese Eappen
    • INTRODUCTION
      • What is Inflation
      • Indices – WPI/CPI
      • Deflation
      • Disinflation
      • Hyper-Inflation
      • Stagflation
      • ‘ Growing Economy’
    • Why is some INFLATION good
      • ‘ Downward Rigidity’ of nominal wages
        • Workers’ reluctance to accept cuts
        • 2% wage cut in ‘0 inflation’ ~ 3% raise in 5% inflation
        • Real wage>equilibrium implies higher unemployment
      • ‘ Sticky Downward’ Prices
        • Tend to creep upwards- ‘0 inflation’ punishes other sectors
    • Why is some INFLATION good
      • Stimulates economy in short run
        • Encourages spending- Keynes
        • Promotes consumption
        • Hidden risk pressure- invest your savings !!
      • Central bank’s tool to regulate
        • Control of money supply & CRR
        • MV=PY
    • Why is some INFLATION good
      • Phillips Curve : Trade-off between inflation & unemployment
        • Increase Aggregate Demand
        • Higher Output (Lower Unemployment)
        • Higher Price level (Higher Inflation)
    • Thank You Queries….