You are on page 1of 13

INFLATION

Presented By:-

47. Tanmay Baid


51. Ruchit Chauhan
53. Vaishnavi Date
55. Dipti Deshpande
57. Jayshri Ghorpade
59. Tasneem Husain
What is Inflation

 It is defined as sustained increase in general price level


 Inflation denotes the decrease in purchasing power of the
currency
 Government don’t prefer zero rate of inflation but a low rate of
inflation
TYPES OF INFLATION.

1. Demand Pull Inflation.


2. Cost pull Inflation
⁕ Causes of Inflation.

1. From Demand Side 2. From Supply Side


A. Increase in money supply. A. Shortage of factors of production .
B. Increase in disposal income. B. Industrial disputes.
C. Increase in consumer spending. C. Natural calamities.
D. Cheap monetary policy. D. Artificial scarcities.
E. Increase in public expenditure. E. Increase in exports.
F. Increase in private expenditure. F. Law of diminishing returns.
G. Increase in goods in foreign market. G. International factors.
H. Reduction in taxation.
I. Change in expectation.
EFFECTS OF INFLATION
 Effects on distribution of income and wealth:
 Creditors and debtors
 Producers and workers
 Fixed income earner
 Investors
 Traders ,business people
 Farmers
 Government

 Effects on production:
 Misallocation of resources
 Changes in the system of transaction
 Reduction in production
 Fall in quality
 Reduction in saving
 Other effects:

 Financial institutions
 On foreign trade
 Currency
 Social
 Political
Measures To Control Inflation

 Monetary measures
 Credit control
 Demonetization of currency
 Issue of new currency

 Fiscal measures
 Reduction in unnecessary expenditure
 Increase in taxes
 Increase in saving
 Surplus budgets
 Public debt
 Other Measures To Control Inflation Contd.

 To increase production
 Rational wage policy
 Price control
 Rationing
DEFLATION
 Deflation is defined as the decrease in the average price level of
goods and services.

 In the words of Crowther, “Deflation is that state of the economy in


which the value of money is rising or prices are falling”.

 It is a situation when prices fall along with reduction in output and


employment.
EFFECTS OF DEFLATION
Comparison
Basis For Comparison Inflation Deflation
Meaning Value of money decreases When value of money
in the international market. increases in the
international market.
Effects Increase in the general Decrease in general price
price level level

National Income Does not decline Declines

Good for Producers Consumers

Consequences Unequal distribution of Rise in the level of


income employment

Effect on Economy A little bit of inflation is good Deflation is not good for the
for the economy economy
Country with highest Inflation

Venezuel
a
Thank You !