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INFLATION IS ALMOST
IMPOSSIBLE IN DEVELOPED
COUNTRIES
SUBMITTED BY:
RUHINA DHAWAN(33)
SAKSHI KHANNA(34)
SANDEEP MALHOTRA(35)
SHILPA SRIVASTAVA(36)
SHRUTI GUPTA(37)
INFLATION
“
Inflation is when you pay fifteen dollars for
the ten-dollar haircut you used to get for fiv
e dollars when you had hair.
”
The recent failure in the US housing and credit markets have resulted in a
slowdown in the US economy. 2007 GDP growth was estimated at 2.2% but in
2008 it is projected to be just 0.9%, down from the 10-year average of 2.8%.
Deflation In USA !!!!
There have been three significant periods of deflation in the United
States.
The first was the recession of 1836, when the currency in the United
States contracted by about 30%, a contraction which is only
matched by the Great Depression. This "deflation" satisfies both
definitions, that of a decrease in prices and a decrease in the
available quantity of money.
The third was between 1930-1933 when the rate of deflation was
approximately 10 percent/year, part of the United States slide into
the Great Depression, where banks failed and unemployment
peaked at 25%.
There was sharp deflation in the US (1929-33),but a strong recovery as the price level
stabilized.
Throughout the history of the United States, inflation has approached zero and dipped
below for short periods of time (negative inflation is deflation). This was quite common in
the 19th century and in the 20th century before World War II.
Some economists believe the United States may be currently
experiencing deflation as part of the financial crisis of 2007–2009.
That record was again broken in November, 2008 with a 1.7% decline. In
response, the Federal Reserve decided to continue cutting interest rates,
down to a near-zero range as of December 16, 2008.
Some economists believe over the next two years deflation in the
United States may lead to a deflationary spiral that could bring the
U.S. into the next Great Depression.
Why have many US companies been
concerned about deflation?
GDP Investment
Year (%) Consumption (%) (%)
3. Devaluation of Currency
4 . Less Investments
5 . Transfer of wealth
Inflation in india(95-06)
7
6
5
4
3
2
1
0
95- 96- 97- 98- 99- 00- 01- 02- 03- 04- 05-
96 97 98 99 00 01 02 03 04 05 06
inflation…
CHINA
CHINA-SOME FACTS
POPULATION, 2009
1,329,740,000
UNEMPLOYMENT RATE, 2006 4.3% (official); 17% (unofficial )
INFLATION 4.9% (CPI: 8.7%,Feb 07 - Feb 08)
4.5% (2007 av)
1.7% (2006 av)
source:wikiepedia
INFLATIONARY TRENDS IN CHINA
1988-1989
1993-1996
2007
2008
DIFFERENT FACTORS OF INFLATION
Monetary Reasons
But he added, "The situation of industrial production remained grim." The year-on-year drop in the CPI,
reported by the National Bureau of Statistics, was the first since December 2002.
Economists worry that, unless China's four trillion yan, or US$585 billion (US$1 = RM3.70), stimulus plan
kicks in soon, these deflationary pressures will intensify because the economy is saddled with excess
capacity at a time of depressed demand.
Consumers who expect more price declines in future may delay their purchases, weakening the
economy and undermining corporate profits.
"I think this is the first sign of deflation," Qing Wang, China economist for Morgan Stanley in Hong Kong,
said of the CPI drop.
"We expect an additional policy response, mainly to prevent deflationary expectations from getting
entrenched."
Shanghai stocks recouped early losses and ended 1.88 per cent higher as investors shrugged off the
slide into deflation and took comfort from strong lending data.
1 2 .5 % y/ y % y/ y 1 2 .5
1 0 .0 Producer prices 1 0 .0
7 .5 Cons umer prices 7 .5
5 .0 5 .0
percent
percent
2 .5 2 .5
0 .0 0 .0
-2 .5 Cons umer prices excl. food DB forecas t -2 .5
-5 .0 -5 .0
02 03 04 05 06 07 08 09
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