Presentation inflation


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Presentation inflation

  1. 1.  The overall general upward price movement of goods and services in an economy (often caused by a increase in the supply of money), usually as measured by the Consumer Price Index and the Producer Price Index. Over time, as the cost of goods and services increase, the value of a dollar is going to fall because a person wont be able to purchase as much with that dollar as he/she previously could.
  2. 2.  While the annual rate of inflation has fluctuated greatly over the last half century, ranging from nearly zero inflation to 23% inflation, the actively tries to maintain a specific rate of inflation, which is usually 2-3% but can vary depending on circumstances. opposite of deflation.
  3. 3.  Economic Situation of continuously rising Price level and the falling value of money. According to Prof. Rowan, “ Inflation is the Process of Price Increase.” Harry johnson defines inflation as a sustained rise in Prices. Crowther Defines “inflation as a state in which the value of money is falling i.e. Prices are rising”
  4. 4.  Continuously Rising Price Trend, whether it is measured through wholesale Price Index (WPI) or Consumer Price Index (CPI) The money Supply is in excess of requisite Production and exchange needs of the economy. There is over expansion of credit by the banks. There is a lack of financial discipline on the part of the government.
  5. 5.  A large number of commodities are in short supply. The rate of return of speculative hoarding of commodities, Precious metals like gold and silver and investments in immovable Properties. Interest rates are Higher Labour Unrest,Strikes,lock-outs etc. Rising labour costs Higher indirect taxes imposed by the government.
  6. 6.  Moderate Inflation Galloping Inflation Hyper Inflation
  7. 7.  Means Low Inflation/Reasonable/Fair It is mild and tolerable form of Inflation It occurs when Prices are rising slowly When the rate of Inflation is less than 10 per cent annually. It means Price level rising with a limit of 4 per cent per annum.
  8. 8.  There is a single digit inflation rate (less than 10 per cent )annually. It does not disrupt the economic balance It is regarded as stable inflation in which the relative prices do not get far out of line. People’s expectations remain more or less stable under moderate inflation. Under low inflation rate the real interest rate is not too much low or negative so many can serve its role as a store of value without difficulty.
  9. 9.  When the movement of Price accelerates rapidly, running inflation emerges. Running inflation may record more than 100 per cent rise in Prices over a decade. Therefore when Prices rise by more than 10 per cent a year , here running inflation occurs. Galloping Inflation is really a serious Problem and it causes economic distortions and disturbances.
  10. 10.  “When Prices are rising at double or triple digit rates of 20,100or 200 per cent a year, the situation may be described as galloping Inflation.” - By Samuelson
  11. 11.  In this type of Inflation Prices rise every movement There is no limit to the height to which Prices might rise. It is a Out of control inflation with prices going up day-by-day. In quantitative terms, when Prices rise over 1000 per cent in a year it is called a hyper-inflation.
  12. 12.  It represents the most Pathetic deterioration in People’s Purchasing power. It is apparently generated by a massive fiscal dislocation It is amplified by wage Price spiral The velocity of circulation of money increases very fast The real wages tend to decline fast The structure of relative prices of goods become highly unstable.
  13. 13.  Over expansion of money supply Expansion of bank credit Deficit financing Ordinary Monetary factors: -High non development expenditure -Huge Plan investment -Black money -High Indirect taxes
  14. 14.  Non monetary Factors: -A High Population growth -Natural calamities and bad weather condition -Speculation & hoarding -High Prices of Imports -Monopolies -Underutilization of resources
  15. 15.  Effect on Production Distributional effect Effects on consumption and Welfare Other Economic Effects: Deterioration in savings Distortion of the budget Disturbance in Planning Lowering of international competitiveness Distortion of the exchange rate Social and Political consequences of inflation
  16. 16.  Question: Find out the Current Inflation Rate of INDIA. In which Type of Inflation the Indian Inflation rate falls. Question: Suggest the measures to recover Inflation?