MACRO ECONOMICSPRESENTATION

TOPIC-INFLATION

SUBMITTED BY,PRABHJOT KAUR

SUBMITTED TO,DR. SHIPRA AGARWAL

CONTENTS•INTRODUCTION

•DEFINITION•TYPES OF INFLATION•CAUSES OF INFLATION

•CONSEQUESNSES OF INFATION•MEASURES OF INFLATION

INTRODUCTION Inflation is defined as a sustained increase in the price level or fall in the value of the money.

When the level of currency of a country exceeds the level of production, inflation occurs.

Value of money depreciates with the occurrence of inflation.

Definition

According to C.CROWTHER, “Inflation is state in which Value of Money is Falling and Prices are rising.”

According to SAMUELSON, “Inflation denotes a rise in the general level of prices”.

OPEN INFLATION

SUPPRESSED INFLATION

GALLOPING INFLATION

CREEPING INFLATION

HYPER INFLATION

TYPES OF INFLATION

TYPES OF INFLATION

1. OPEN INFLATION:- Where there is no control on the rising prices and prices are free to find their own level, the inflation under this condition is called OPEN INFLATION.

2. SUPPRESED INFLATION:-When inflation takes place but at a lower than the potential rate, due to the measures taken by government.

TYPES OF INFLATION

3. GALLOPING INFLATION:- Very rapid inflation which is almost impossible to reduce.

4. CREEPING INFLATION:-When the general level of price rises at a moderate rate over a long period of time, It is called moderate inflation or creeping inflation.

TYPES OF INFLATION

5. HYPER INFLATION:- Hyper Inflation is an extremely rapid period of inflation, usually caused by rapid increase in the money supply.

CAUSES OF INFLATIONFACTORS ON DEMAND SIDE :-

• Increase in money supply• Increase in disposable income• Deficit financing• Foreign exchange reserves

CAUSES OF INFLATIONFACTORS ON SUPPLY SIDE :-

• Rise in administrated prices• Erratic agriculture growth• Agricultural price policy• Inadequate industrial growth

CONSEQUENCES OF INFLATION

Adverse effect on production Adverse effect on distribution Obstacle to development Changes in relative prices Adverse effect on B.O.P.

MEASURES OF INFLATION1. Monetary policy Credit control Demonetization of currency Issue of new currency

2. Fiscal policy Reduction in unnecessary expenditure Increase in taxes Increase in savings Surplus budgets Public debt

3. Other measures• To increase production• Rational wage policy• Price control

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