Inflation is defined as a sustained increase in the general price level in an economy over time. It can be caused by demand-pull factors, like too much money chasing too few goods, or cost-push factors like increases in production costs. Inflation is measured by changes in a consumer price index and can vary in its rate from creeping to hyperinflation. Governments use monetary and fiscal policies like controlling the money supply and public spending to combat inflation.

6. Inflation is the rate at which prices increase annually
Prices go up due to two factors i.e. cost-push factors
and Demand-pull factors .
Too much money chasing, too few goods.

7. For a Common Man -
Rise in price.
In Economics –
Slow & Steady rise in
price over a
period of time

8. Inflation is defined as rise in the
general level of prices of goods and
services in an economy over a period of
time

9. Other Definitions
a) Harry Johnson “sustained rise in price”
b) Coulborne “Too much money chasing
too few goods.”
c) Crowther “a state in which the value of
money is falling i e. prices are rising.”
d) Samuelson “ inflation occurs when the
general level prices and costs are
rising”
e) J M Keynes “ increase price after the
level of full employment is reached is
true inflation”

10. Types of Inflation
A) According to Rate of Inflation:
i. Creeping Inflation
ii. Walking Inflation
iii. Running Inflation
iv. Galloping/Hyper Inflation
B) According to Time Period:
i. Peace-time Inflation
ii. War-time Inflation
iii. Post war-time Inflation

11. Y
Hyper inflation
Percentage of Price level
Running inflation
Walking inflation
Creeping inflation
X
Time in Years

12. C) According to the scope or coverage
i. Comprehensive inflation
ii. Sporadic inflation
D) According to the Government’s reaction
i. Open inflation
ii. Suppressed inflation

13.  Extremely rapid or out of control inflation.
 There is no precise numerical definition to hyperinflation.
 The most famous example of hyper inflation occurred in
Germany between January 1922 and November 1923.

14. According to Causes :
A) Demand pull inflation : Demand side factors
leads to demand pull inflation .It occurs when
aggregate demand is in excess of aggregate
supply because of monetary and real factors
which are described below :
 Increase in Money Supply
 Government Spending
 Cut in tax rates
 Credit creation

15. B)Cost push inflation
It emerges in the economy in the
absence of excess demand due to
pressure of various factors which shift
the aggregate supply function.
High wages (wage push inflation)
Profit push inflation

16. 2) Differs greatly if calculated on the Consumer Price
Index (CPI)

18. Causes of Inflation
A Demand Side B Supply Side
i) Increase in income i) Shortage of supply
ii) Increase in Public of FOP
expenditure ii) Hoarding by traders
iii) Reduction in iii) Hoarding by
taxation consumers
iv) Repayment of past iv) Reduction in
internal debt imports
v) Parallel economy v) Increase in exports
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19. Effects of Inflation
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20. Effects of Inflation
A Effects on Production
i) Affects Savings & Investment
ii) Leads to Speculation
iii) Leads to Hoarding
iv) Distortion of Production Pattern
v) Deterioration of Quality
vi) Creation of Sellers’ market
vii) Confidence in currency is lost
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21. B Effects on Distribution
i) Debtors and Creditors
ii) Entrepreneurs and businessmen
iii) Fixed income groups
iv) Investors
v) Farmers
vi) Anti-social elements
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22. Control of Inflation
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23. Control of Inflation
( Anti Inflationary Measures)
A)Monetary Measures
i) Quantitative and Qualitative Credit
ii) Control Measures
B)Fiscal Measures
i) Effective Taxation Policy
ii) Effective Public Expenditure Policy
iii) Public Borrowing
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24. C Direct Measures
i) Increase Supply of FOP
ii) Control of Population
iii)Control of Hoarding
iv)Temporary Increase in Imports
v) Temporary Decrease in Exports
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25. Thank You
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