It covers all the important aspects of inflation like meaning, causes, measuring and its impacts. It is useful for undergraduate and graduate students in Economics, Commerce, and Management.

1. Inflation
 Meaning
 Causes of Inflation
 Measuring Inflation
 Important terms of Inflation
 Effect of Inflation
Prepared By
Dr. Shujauddin Khan
DCBM
Integral University,
Lucknow
Mob. No. 9319270897

2. Inflation
Inflation is the sustained increase in the general
price level of goods and services in an economy
over a period of time. It means that, on average,
prices are rising, and the purchasing power of
money is decreasing.
Pr
ic
e
Purcha
sing
Power

3. Causes
of
Inflation
Cost Pull Inflation
Built-In Inflation:
Demand Pull Inflation

4. Cost-push inflation is a type of inflation that occurs when
the general price level of goods and services in an
economy rises due to increases in production costs.
 Rising Labor Costs
 Higher Raw Material Prices
 Supply Chain Disruptions
 Energy Price Increases
 Government Regulations
 Exchange Rate Fluctuations
Cost- Push Inflation

5. Demand- Pull Inflation
It is driven by an increase in aggregate demand in the economy.
Demand-pull inflation typically occurs during periods of strong
economic growth when consumers and businesses are spending
more, and demand for goods and services is high.
 Increased Consumer Spending
 Business Investment
 Government Spending
 Monetary Policy
 External Factors

6. Built in Inflation
Built-in inflation," also known as "inflationary expectations" or "wage-price
inflation," refers to a situation in which expectations of future inflation become
ingrained in the economic behavior of individuals, businesses, and
institutions. This, in turn, leads to a self-fulfilling cycle of rising prices and
wages. It is a key concept in understanding the persistence of inflation in an
economy.
 Expectations
 Wage Increases
 Price Increases
 Continuation of the Cycle

7. Measuring
Inflation
Consumer Price Index (CPI)
Producer Price Index
(PPI)
GDP Deflator
Wholesale Price Index
(WPI)
Asset price inflation

8. Important Terms related to Inflation
Disinflation: Reduction in the rate of inflation
Deflation: Persistent decrease in the price level (negative inflation)
Reflation: Price level increases when the economy recovers from recession
based on value of inflation
Creeping inflation – If the rate of inflation is low (upto 3%)
Walking/Trotting inflation – Rate of inflation is moderate (3-7%)
Running/Galloping inflation – Rate of inflation is high (>10%)
Hyper Inflation – Rate of inflation is extreme
Stagflation: Inflation + Recession (Unemployment)
Inflationary gap: Aggregate demand > Aggregate supply (at full employment
level)
Core inflation: Based on those items whose prices are non-volatile.
Headline inflation: All commodities are covered in this.