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Inflation Dynamics

Inflation Dynamics

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Published by a_mohapatra55552752

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Published by: a_mohapatra55552752 on Nov 12, 2009
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12/10/2010

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Inflation DynamicsInflation Dynamics
Dr.Mrutyunjay DashDr.Mrutyunjay Dash
 
 
Few words about inflation…Few words about inflation…It is a process in which the general price level in a countryIt is a process in which the general price level in a countryrecords a sustained and appreciable increase over a period of records a sustained and appreciable increase over a period of time.time.The increase is significant or appreciable. Slow rate of The increase is significant or appreciable. Slow rate of increase [less than 2 % per annum] is considered with priceincrease [less than 2 % per annum] is considered with pricestability.stability.It has a time dimension/over a period of time generally takenIt has a time dimension/over a period of time generally takenas one year.as one year.It is a key indicator of the state of business environment andIt is a key indicator of the state of business environment andeconomic performance.economic performance.
 
 
Consumer Price Index (CPI):Consumer Price Index (CPI):It measures the cost of buying a standard basket of goodsIt measures the cost of buying a standard basket of goodsand services at different points of time.and services at different points of time.The standard basket is constituted to represent as closelyThe standard basket is constituted to represent as closelyas possible the consumption pattern of the population.as possible the consumption pattern of the population.It may include food and clothing, housing, entertainment,It may include food and clothing, housing, entertainment,electricity, fuel, and other common items of consumption inelectricity, fuel, and other common items of consumption inday-to-day life.day-to-day life.Weights are to be given to each item for calculatingWeights are to be given to each item for calculatingweighted average.weighted average.How the weight is decided?How the weight is decided?Based on the proportion of the item in the total consumer Based on the proportion of the item in the total consumer expenditure on the basket.expenditure on the basket.How to find out the proportion?How to find out the proportion?Extensive household surveys are conducted.Extensive household surveys are conducted.

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