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Inflation - Good or Bad?
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Inflation - Good or Bad?

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Transcript

  • 1. INFLATION: Good for a Growing Economy Team 10 07927802 Avinav Goel 07927838 Varghese Eappen
  • 2. INTRODUCTION
    • What is Inflation
    • Indices – WPI/CPI
    • Deflation
    • Disinflation
    • Hyper-Inflation
    • Stagflation
    • ‘ Growing Economy’
  • 3. 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
  • 4. 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
  • 5. Why is some INFLATION good
    • Phillips Curve : Trade-off between inflation & unemployment
      • Increase Aggregate Demand
      • Higher Output (Lower Unemployment)
      • Higher Price level (Higher Inflation)
  • 6. Thank You Queries….