INFLATION EXPLAINED

BHARAT
Inflation means a persistent rise in price
levels of commodities and services., leading
to a fall in currency’s purchasing power.
A country is said to under pressure of
inflation when the prices of most goods and
services continue to creep upward. It is
measured by Consumer Price Index (CPI),
Wholesale Price Index (WPI), Retail Price
Index (RPI).

Definition of Inflation
Inflation occurs when the total demand for goods and services in
an economy exceeds the supply of the same. When the supply
is less, the prices of these goods and services would rise,
leading to a situation called inflation.
Inflation affects the rich and poor and it poses a threat to the
economy. When inflation affects economy, to maintain the
same living standard you have to pay more for same amount
of goods and services you had used prior to inflation.
Remember that your income may not increase at same rate as
inflation.
People tend to save less in an economy affected by inflation
because the price of services and goods are very high and
there is nothing or very less left over income available to
save.

How Inflation Affects Economy

 Some reasons for occurrence are:
 If the cost of production of goods and
services increases, the price of the end
product would also increase.
 There is a possibility of inflation when the
business houses and industries increases
their profit. Margins.
 Fiscal Inflation occurs when there is
excess government spending.

Why does Inflation occur ?

Wage Inflation
Cost-Push Inflation
Demand-Pull Inflation
Pricing Power Inflation
Sectoral Inflation
Fiscal Inflation
Hyper Inflation

Types Of Inflation
Reducing the central bank
interest rates and increasing the
bank interest rates.
Controlling prices and wages
Providing cost of living allowance
to citizens in order to create
demand in the market.

Measures to Control Inflation