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    Inflat Inflat Presentation Transcript

    • INFLATION
      PRESENTED BY-
      SHASHANK MISHRA
      SHAILESH MISHRA
      LOKESH SHARMA
      PRITI BISHT
      RAJAT CHATURVEDI
      TARIQUE SHADAB KHAN
    • DEFINITION
      According toParkin and Bade Inflation is an upward movement in the average level of prices. Its opposite is deflation , a downward movement in the average level of prices. The boundary between inflation and deflation is price stability.
    • TYPES OF INFLATION
      Wage Inflation: Wage inflation is also called as demand-pull or excess demand inflation. This type of inflation occurs when total demand for goods and services in an economy exceeds the supply of the same.
      Cost-push Inflation: As the name
      suggests,
      if there is increase in the cost of
      production of goods and services ,
      there is likely to be a forceful
      increase in the prices of finished
      goods and services.
    • Pricing Power Inflation: Pricing power inflation is more often called as administered price inflation. This type of inflation occurs when the business houses and industries decide to increase the price of their respective goods and services to increase their profit margins.
    • Sectoral Inflation: This is the fourth major type of inflation. The sectoral inflation takes place when there is an increase in the price of the goods and services produced by a certain sector of industries. For instance, an increase in the cost of crude oil would directly affect all the other sectors, which are directly related to the oil industry.
    • CAUSES OF INFLATION
      Inflation is caused due to several economic factors:
      When the government of a country print money in excess, prices increase to keep up with the increase in currency, leading to inflation.
      Increase in production and labor costs, have a direct impact on the price of the final product, resulting in inflation.
      • When countries borrow money, they have to cope with the interest burden. This interest burden results in inflation.
      • High taxes on consumer products, can also lead to inflation.
      • Demands pull inflation, wherein the economy demands more goods and services than what is produced.
      • Cost push inflation or supply shock inflation, wherein non availability of a commodity would lead to increase in prices
    • There are two broad ways in which governments try to control inflation. These are-
      1. Fiscal measures.
      2. Monetary measures
    • Measures to control inflation
      Effective policies to control inflation need to focus on the underlying causes of inflation in the economy.
      Monetary Policy
      Monetary policy can control the growth of demand through an increase in interest rates and a contraction in the real money supply. For example, in the late 1980s, interest rates went up to 15% because of the excessive growth in the economy and contributed to the recession of the early 1990s.
      Fiscal Policy
      • Higher direct taxes (causing a fall in disposable income)• Lower Government spending • A reduction in the amount the government sector borrows each year (PSNCR)
      Direct wage controls - incomes policies
      Incomes policies (or direct wage controls) set limits on the rate of growth of wages and have the potential to reduce cost inflation.