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>ECONOMICS FOR ENGINEERS [ HM - EE 601 ]

>CA - IV

• TOPIC – STAGES OF INFLATION

Inflation, Stages And Types Of Inflation
When the prices of goods along with services increase, inflation occurs. There
are many types of inflation such as creeping, walking, galloping and
hyperinflation. There are also a specific asset and wage inflation. Mentioned
below are the stages and different types of inflation.
What Are The Different Stages Of Inflation?

Inflation will pass through three different stages. The three stages of inflation are
(a) The Pre-Full Employment Stage
(b) The Full Employment Stage
(c) The Post-Full Employment Stage
The Pre-Full Employment Stage: 
In the first stage, there occurs a rise in the price level. It is less than
proportionate to the supply of money’s increase. If the supply of money
increases by 10%, so there will be an immediate price level rise. Hence the
production of goods, as well as services, receives some stimulus. Because of
this increase in the goods and services output, the price level will fall. But if
again there is an increase of 10% in the supply of money, there will be a rise
in the price level. This will encourage good as well as services produced in the
economy. Thus if there occurs continuous increase in the money supply, a
stage will be seen when the goods, as well as services output, may not be
increasing in the same proportion in which there is an increase in the supply
of money. The reason is that with production expansion, there is a decline in
the supply of the production factors.
The Full Employment Stage:
 If
without any disturbance, the supply of money keeps on increasing, then there
the production will stop to increase after some time. The production will be
becoming stagnant. The only reason is that each and every productive resource are
completely employed then. Additional resources are unavailable for further
production expansion. Hence the further production expansion ends. Since the
production becomes persistent, the price level will start to increase in the same
proportion as there occurs an increase in the supply of money.
The Post-Full Employment Stage:
If there is a continuous increase in the supply of money, even after that time of full
employment, then for a certain time there will be an increase in the price level. It will
be in the same proportion in which the increase takes place in the supply of money.
But afterward, the supply of money increases a lot that people loses confidence in it.
Moreover, the increase in the price level is high than that of the supply of money. So
if the supply of money is 10%, then there is an increase of 20-30% or maybe even
40% of the price level. In this kind of a scenario, it is very difficult to examine the rise
in the price level. This is known as the final stage of inflation. There will be such a
high rise in the price that there occurs a replacement of money exchange by
commodity gradually.
What is India's inflation rate 2021?
5.1 per cent
RBI projects retail inflation at 5.1% in 2021-22. The Reserve Bank of India (RBI) also
projected consumer price index (CPI) inflation at 5.1 per cent for FY21-22.
 THANK
YOU
• NAME – KUMAR PRITHWIRAJ
BHOWMIK
• STUDENT CODE –
BSSE/UT/EE/18/052
• MAKAUT ROLL – 27001619042