Group9 a 3-sec-a

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Group9 a 3-sec-a

  1. 1. GROUP 9- Rachit Nayyar Rahul Bansal Prayanka Senger Prashant Dixit
  2. 2. <ul><li>Inflation : </li></ul><ul><li>This is the process by which the price level rises and money loses value. </li></ul><ul><li>There are two kinds of inflation: </li></ul><ul><li>Demand pull </li></ul><ul><li>Cost push </li></ul>
  3. 3. <ul><li>Demand pull inflation may be due to : </li></ul><ul><li>Increase in money supply </li></ul><ul><li>Increase in government purchases </li></ul><ul><li>Increase in exports </li></ul>
  4. 4. <ul><li>Cost push inflation may arise because of : </li></ul><ul><li>Increase in money wage rates </li></ul><ul><li>Increase in money prices of raw materials. </li></ul>
  5. 5. <ul><li>Extremely rapid or out of control inflation </li></ul><ul><li>There is no precise numerical definition to hyperinflation </li></ul><ul><li>Price increases are so out of control that the concept of inflation is meaningless. </li></ul>
  6. 6. <ul><li>A condition of slow economic growth and </li></ul><ul><li>relatively high unemployment accompanied </li></ul><ul><li>by inflation </li></ul>
  7. 7. <ul><li>WPI (Wholesale Price Index) </li></ul><ul><li>The WPI number is a weekly measure of wholesale price movement for the economy </li></ul><ul><li>India- the only major country that uses WPI </li></ul>
  8. 8. <ul><li>A measure of the average price of consumer goods and services purchased by households </li></ul><ul><li>CPI indicates the change in the purchasing power of the consumer </li></ul><ul><li>Published on a monthly basis </li></ul>
  9. 9. <ul><li>Shoe leather costs </li></ul><ul><li>Menu costs </li></ul><ul><li>Tax distortions Confusion </li></ul><ul><li>Inconvenience Arbitrary redistribution of wealth </li></ul>
  10. 10. <ul><li>Shoe leather costs are the resources wasted when inflation encourages people to reduce their money holdings </li></ul><ul><li>Inflation reduces the real value of money, so people have an incentive to minimize their cash holdings </li></ul><ul><li>Less cash requires more frequent trips to the bank to withdraw money from interest-bearing accounts </li></ul>
  11. 11. <ul><li>Menu costs are the costs of adjusting prices </li></ul><ul><li>During inflationary times, it is necessary to update price lists and other posted prices </li></ul><ul><li>This is a resource-consuming process that takes away from other productive activities </li></ul>
  12. 12. <ul><li>The income tax treats the nominal interest earned on savings as income, even though part of the nominal interest rate merely compensates for inflation </li></ul><ul><li>The after-tax real interest rate falls, making saving less attractive </li></ul>
  13. 13. <ul><li>Monetary policy- Bank rate policies, Open Market operations, Reserve requirement ratios </li></ul><ul><li>Fiscal policy-taxation, public borrowing, public expenditure Direct Control-Fixing ceiling prices of the products, Rationing </li></ul><ul><li>Miscellaneous methods-Controlling Wages, Controlling population growth </li></ul>

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