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Inflation PPt

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Inflation PPt

  1. 1. AS Economics PRESENTATION ON INFLATION Priyanka HarjaiTutor2u &Mrs G
  2. 2. INTRODUCTION  inflation is a rise in the general level of prices of goods and services in an economy over a period of time.  inflation also reflects an erosion in the purchasing power of money  Inflations effects on an economy can be positive or negative.  The rate of inflation is measured by the annual percentage change in the level of prices as measured by the consumer price index.Tutor2u & Mrs G
  3. 3. CAUSES OF INFLATION  It can be divided into two broad categories: a) quality theories of inflation b) quantity theories of inflation  The quality theory of inflation rests on the expectation of a seller accepting currency to be able to exchange that currency at a later time for goods that are desirable as a buyer  The quantity theory of inflation rests on the quantity equation of money, that relates the money supply, its velocity, and the nominal value of exchanges.Tutor2u & Mrs G
  4. 4. MEASURING INFLATION  Inflation is usually estimated by calculating the inflation rate of a price index, usually the Consumer Price Index.  The Consumer Price Index measures prices of a selection of goods and services purchased by a "typical consumer“  The inflation rate is the percentage rate of change of a price index over time.  Producer price indices(PPIs)  Commodity price indices  Core price indicesTutor2u & Mrs G
  5. 5. TYPES OF INFLATION  Demand-pull Inflation  Cost-push Inflation  Pricing Power Inflation  Sectoral InflationTutor2u & Mrs G
  6. 6. EFFECTS OF INFLATION  production  on Income Distribution  Consumption And Welfare  Foreign Trade  Social and Political Effects  ManufacturersTutor2u & Mrs G
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  8. 8. NEGATIVE EFFECTS OF INFLATION Hoarding Social unrest and revolts Hyperinflation Allocative efficiency Shoe leather cost Menu costs Business cyclesTutor2u & Mrs G
  9. 9. Costs and Consequences of Inflation  Money loses its value and people lose confidence in money as the value of savings is reduced  Inflation can get out of control - price increases lead to higher wage demands as people try to maintain their living standards. This is known as a wage-price spiral.  Consumers and businesses on fixed incomes lose out because the their real incomes falls - employees in poor bargaining positions lose outTutor2u & Mrs G
  10. 10. MEASURES TO CONTROL INFLATION  Monetary policy  Fixed exchange rates  Gold standard  Wage and price controls  Cost-of-living allowanceTutor2u & Mrs G
  11. 11. Tutor2u & Mrs G
  12. 12. Thank youTutor2u & Mrs G

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