Inflation & deflation

impact on economy

By
Anand Kumar tiwari
Raushan Kumar
(mba iv sem)
Amity business school
Inflation & Deflation
impact on economy
 Major outlines
 Introduction
 Definition
 Types of Inflation/deflation
 Causes of Inflation/deflation
 Effects of Inflation/deflation
 Inflation Vs Deflation
 Introduction
Prices 2008 commodity Prices 1956

Rs.15/kg rice 0.30/kg

Rs.12/kg wheat 0.25/kg

300/kg almond 3/kg

8/kg potato 0.20/kg

 Intro……………

 Situation of rapid general

increase in price level.

 Decline in the value of

money.
Definitions:
 According to Crowthers “ Inflation means a state
in which the value of money is falling i.e.…
prices are rising”.
 According to Pigou “ Inflation arises when money
income is expanding more than proportionate to
income earning activity”.
 According to Prof. Samuelson “ Inflation occurs
when general level of prices & cost are rising”.
 Types of inflation

 Creeping inflation
 Walking inflation
 Running inflation
 Galloping inflation
 Hyper inflation
Cont…

Demand – pull inflation:

 Due to high GDP and low unemployment.
Supply shock inflation:
 due to adverse change in price of raw materials (
like oil).
Built in inflation:
 induced by expectations based on previous
inflation levels.
 Causes of inflation

 Increases in money supply.

 Expansion of bank credit.
 Deficit financing.
 Black money.
 Scarcity.
 Taxes.
 Population growth.
 Effect of Inflation

 Debtors and creditors.

 People with fixed income.
 Consumers .
 Producers and businessman.
 Farmers.
 Tax payers and government.
 Deflation

 A general decline in price often caused by a

reduction in the supply of money or credit.
 Deflation can be caused also by decrease In
government , personal or investment spending.
 Deflation has the side effect of increased
unemployment.
 Causes of deflation

 Decreasing money supply.

 Increasing supply of goods.

 Decreasing demand of goods.

 Increasing demand for money.

 Effect on economy as well as our
self
 Inflation affects you directly when you go to
the grocery store but find that a hundred
dollars doesn't get you the same amount as it
did last year.
 Many people hang on to their money & stop
spending on many non-essential items
because of fear.
 Houses & Cars begin to depreciate.
Cont…

 Business starts to dry up & employers find

themselves cutting down on staff.
 Our fixed income gets depleted & we find
ourselves having to survive on even less.
 The quality or standard of life that many have
grown, downgrades as a direct result of
inflation.
 Thank you

:by:
Anand Kumar tiwari
Raushan Kumar