INFLATION

LEAD TO INFLATIONSustained Rises in

weighted average of all prices

General Increase in Prices

More Focus on Rise in Prices, less on

causes

INFLATION

DECLINING LIVING STANDARDS

WORTHLESS MONEYDEVALUATION OF

CURRENCY

ECONOMIC COLLAPSE

TYPES OF INFLATION

aggregate demand for final goods exceeds

COST PUSH INFLATION

higher cost of production and

material

Measures of inflation

Bank Rate Policy

Central Bank Raises Bank Rates

Flow of money from commercial banks to public narrowed

Cash Reserve Ratio

Increase in CRR reduce the cash with commercial banks

Leads to• Low supply of currency in market • Higher rate of interest & low inflation

Effects of InflationGainers-

Businessmen + Farmers + Shareholders + Government + Debtors

Losers - Creditors + Wage Earners + Pensioners + Students + Bondholders

Rate of Inflation in Different Countries

Saudi Arabia

United States of America

Venezuela Japan Egypt Russia Spain UAE Greece Iran Syria

2.8

1.1

57.3

1.5

9.86.2

-0.2

1.8

-1.1

28.8

49.5

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