This document discusses inflation, including its definition, types, causes, effects, and measures to control it. Inflation is defined as a sustained increase in the general price level in an economy over time. The main causes of inflation include an increase in the money supply, rise in aggregate demand, and contraction of aggregate supply. Effects of uncontrolled inflation include inefficiencies in markets, uncertainty, and imbalance of trade. Measures to control inflation involve monetary policies like credit control, fiscal policies like increasing taxes, and other steps like price controls and increasing production.

1. INFLATION AND CONTROL
MEASURES
BY
K.VIGNESH
MFT 15078 (FEC)
DEPARTMENT OF FISHERIES ECONOMICS

2. SYNOPSIS
INTRODUCTION
DEFINITION
 TYPES OF INFLATION
CAUSES OF INFLATION
EFFECTS OF INFLATION
HOW IS INFLATION MEASURED
CONSEQUENCES OF INFLATION
MEASURES OF INFLATION

3. INTRODUCTION
• An increase in the general level of prices in an economy that is
sustained over a period of time is called inflation.
• When the level of currency of a country exceeds the level of
production, inflation occurs.
• Value of money depreciates with the occurrence of inflation.
• When demand is more than the supply that may lead to
inflation.

4. DEFINITION
 According to C.CROWTHER, “inflation is state in
which the value of money is falling and the prices
are rising.”
 In economics “ too much money chasing too few
commodities is termed as inflation”

5. IMPORTANT TERMS RELATED TO INFLATION
Deflation: is the opposite of inflation when fall in prices
occurs.
Disinflation: is process of bringing down prices moderately
from their high level.
Stagflation: is a term in macroeconomics used to describe a
period of high inflation combined with low incomes,
unemployment, or economic stagnation.

6. MEASURING INFLATION
• Inflation is rate of change in the price level.
• If the price level in the current year is p1 and in the previous year p0.
• The inflation for the current year is
[(p1 - p0) / p0] x 100

7. TYPES OF INFLATION

8. Open inflation -:
The rate where costs rise due to economic trends of
spending products and services.
Suppressed inflation -:
Existing inflation disguised by government price controls or
other interferences in the economy such as subsidies. Such
suppression, nevertheless, can only be temporary because
no governmental measure can completely contain accelerating
inflation in the long run. It is also called repressed inflation.

9. • Galloping Inflation -:
Very Rapid Inflation which is almost impossible to reduce.
• Creeping Inflation -:
Circumstance where the inflation of a nation increases
gradually, but continually, over time. This tends to be a
typically pattern for many nations. Although the increase is relatively
small in the short-term, as it continues over time the effect will
become greater and greater.

10. • Hyper inflation -:
Hyperinflation is caused mainly by
excessive deficit spending (financed
by printing more money) by a government,
some economists believe that
social breakdown leads to hyperinflation (not vice
versa), and that its roots lie in political rather than
economic causes.

11. CAUSES OF INFLATION
Inflation due to monetary expansion (monetary
inflation)
Inflation due to rise in real aggregate demand (real
inflation)
Inflation due to contraction in aggregate supply

12. Factors on demand side
Increase in population
Increase in money supply
Increase in disposable income
Increase in exports
Foreign exchange reserves

13. Factors on supply side
o Deficiency of capital equipment
o Increase in exports
o Decrease in imports
o Natural disasters
o Inadequate industrial growth

14. CONSEQUENCES OF INFLATION
• They add inefficiencies in the market, and make it
difficult for companies to budget or plan long-term.
• Uncertainty about the future purchasing power of
money discourages investment and saving.
• Higher income tax rates.
• Inflation rate in the economy is higher than rates in
other countries; this will increase imports and reduce
exports, leading to a deficit in the balance of trade.

15. Adverse effect on production
Adverse effect on distribution of income
 Obstacle to development
Changes in relative prices
Adverse effect on the B.O.P

16. MEASURING INFLATION
• The 2 ways of measuring inflation are -: Consumer price index ,
Producer price index & GNP deflator

17. CONTROL MEASURES
Monetary policy
Fiscal policy
other measures

18. Monetary policy
• Credit control
• Demonetization of currency
• Issue of new currency

19. Fiscal policy
• Reduction in unnecessary expenditure
• Increase in taxes
• Increase in savings
• Surplus budgets

20. OTHER MEASURES
• Price control
• To increase production
• Rational wage policy