Inflation

Inflationrefers to the persistent rise in

general price level as measured against
a standard level of purchasing power

Rate of inflation (year t )=price level price level

(year t) (year t-1) 100

price level ( year t-1)

Trends in inflation in
recent years
 deflation

reflation disinflation
inflation

stagflation Hyperinflation
 Types of inflation
according to rate at which prices rise

Inflation

Creeping Hyperinflation
Running
 Outcomes of
hyperinflation
 Types of inflation
according to Robert J Gorden

Inflation

Demand pull Cost push Built in

inflation inflation inflation
Demand pull inflation
 Cost push inflation
p1
Average supply
Price p0

level Average
demand

Q1 Q0
quantity
 Built in inflation
 It refers to type of inflation
that resulted from past event
persists in present

 Inflationary expectations

• Price wage spiral Worker’s demand of

Higher prices
wages
in market
increment

Employer increases prices

 Monetary policy
regulated by reserve bank
of india
8%
7%
6%
5%
4%
3%
2%
1%
0%
bank rate r.r rate repo rate c.r.r
 Pros and cons of W.P.I and
C.P.I
methods C.P.I
W.P.I
 Frequency

released weekly Released monthly

 Delay

Less delay More delay

 Choice of
commodity More methodological
Less methodological
 W .P.I C.P.I
Transparency
More transparent Less transparent
C.P.I and W.P.I