Inflation Flashcards
What is inflation
What are the effect of inflation on economic growth of a country
The main reasons for price rise can be classified under two categories what are they
Inflation refers to the condition of the economy in which there is a continuous increase in the price of goods and services and in this situation the value of money decreases because the consumers have to pay more to buy goods in the market.
Inflation is inductive for the decrease in the purchasing power of a unit of country’s currency.
Due to inflation it causes deceleration of economic growth
That the reason for price rice can be classified under two main categories are increasing demand, reduce supplies
What are the types of inflation
Demand pull inflation
Cost push inflation
Stagflation
Hyper inflation
Structural inflation
Deflation
Disinflation
Reflation
Skew inflation
Creeping inflation
Headline inflation
Core inflation
What is demand full inflation
Cause of demand pull inflation
When the demand of goods and services in an economy is more than the supply then such an economy said to be demand pull economy
Demand pull inflation increases due to increase in population, urbanisation, increase in employment, increase in government expenditure and income of citizen because all these things leads to increase in demand
What is cost push inflation
Cause of cost push inflation
When there is an increase in the cost of commodity in the process of production then the inflation generated due to this is cold coast push inflation
The possible regions for increase in cost push insulation are
Arise due to increase in indirect taxes
higher taxes on intermediate goods
increase in price of input
Hoardings of commodity
Defective supply chain
Crude oil price fluctuation
Low growth of agriculture sector
Interest rate increased by RBI
What is stagflation
Stagflation is defined as a period of inflation combined with a decline in GDP
Stagnation is characterized by slow economic growth and relatively high unemployment
What is hyperinflation
Cause of hyper inflation
effect of hyper inflation
Hyper inflation is the situation when inflation rays at an extremely fast rate. The rate of inflation can increase from 50 times to 300 Times.
The major cause of hyper inflation are
•the government issuing too much currency to finance its deficits,
•Wars and political instabilities
•unexpected increase in people’s anticipation of future inflation
The effect of hyper inflation can be devastating for economy
What is structural inflation
What was the result of structural inflation
Structural inflation is another form of inflation mostly prevalent in developing and low income countries.
This inflation is prevalent in developing countries mainly due to weak structure of economy
The result of structural inflation is imperfection some sectors of the economy like agriculture will witness shortage of supply where is some sectors like consumer goods will witnesses excessive demand.
What is deflation
Who will suffer from loss in condition of deflation and who will gain the advantage of deflation
When there is an in decrease in demand of goods due to access supply in the market then the price also false rapidly due to which purchasing power of money increases this situation is called currency concentration or currency deflation
This is opposite to inflation in this the rate of inflation is negative or below zero
This condition cause loss of those who does not have fixed income example borrowers
This condition is beneficial for those having fixed income or lenders
What is disinflation
This inflation is the process of controlling inflation using which an attempt is made to bring the price back to normal by gradually reducing g it
What is reflation
Reflection is such a system of inflation in which an attempt is made to bring the price to normal level by gradually increasing in it
To control inflation the money supply in the economy is increased by reducing the interest rate cutting taxes
what is skewflation
● When the price increase is for only a few products instead of all the products, it is called squelch inflation
the rate of inflation remains high in some
areas and the situation of currency contraction is seen in some
areas
What is creeping inflation
The condition of the economy in which the rate of inflation is 3% or less is called creeping inflation.
This type of inflation is commonly seen in developed countries (USA). This type of inflation is considered good for the economy.
What is headline inflation
Headline inflation is also called ‘overall inflation’. It is issued on the basis of the Consumer Price index.
This index covers all consumer goods, including food and fuel.
what is Core inflation
Core inflation measures changes in the cost of goods and services, although it excludes the food and energy sectors, as their prices are more volatile
Core inflation is important because it is used to determine the
effect of rising prices on consumer income
How to combat inflation
The central bank follows a strict monitoring policy i.e. loans become expensive means decrease in money supply
Text deduction and subsidies to producers in order to decrease cost of production
Increase contribution to prevent funds extra so people have less enhanced to spend
What is phillip curve
Philip curve shows relationship between the rates of unemployment and inflation in an economy
There is an inverse relationship between the rates of unemployment and inflation
When inflation is low unemployment increases and when inflation increase unemployment decreases.
Effect of inflation on
Customer
Lender
Indebted
Prisoner
fixed income group
importer
exporter
Loss
loss
profit
loss
loss
profit
growth
shortage
What are the measurement of inflation
Which method of measurement of inflation used in India
Wholesale price index WPI and consumer price index CPI
GDP deflator
the wholesale price index is calculated inflation in India
What is wholesale price index
Who release wholesale price index data
What is base year four wholesale price index
The change in wholesale price of commodities in shown in wholesale price index
“Office of economic advisor” of ministry of commerce
2011 - 12
What is consumer price index
Which organisation in India published data of consumer price index
Which base year is used for consumer price
The index measuring average price of goods and services purchased by domestic consumers
The consumer price index is published by central statistics office comes under ministry of statistics and program implementation
Base year for CPI is 2012
What is GDP deflector
GDP deflector measures the difference between real GDP and nominal GDP, and nominal GDP includes inflation so it also measure inflation
GDP deflector is only available with GDP estimates on quarterly basis
