Presentonomica'22" by Econospeak Club

BY-
Lagnajeet Tripathy and Ishaa Mahakud
School of Sustainability,XIM University
Contents:
 What is Inflation?

 Why inflation happens?

 Is inflation necessary?

 What if there was 0% inflation?

 Relation between unemployment and inflation?

 How can government control inflation?

 Consequences of inflation?

 Conclusion/opinion
What is Inflation?
 1958—100 RUPEES
2022-1 RUPEE 20 PAISE
That is 100 rupees of today is equal to 1 rupee 20
paise of 1958
A general increase in prices and fall in the purchasing value of money
Why inflation happens?
 1. Economic Boom

More spending power Increase in demand Businesses increase prices Inflation

 Demand Pull Inflation (Aeroplane case)

2. Increase in prices of raw materials

• The prices of wheat and rice rise due to bad monsoon season
• The prices of oil rise
• Or a new tax imposed by the government which led to the increase in prices of one of the raw
material

 Price increases due to increase in manufacturing costs– Cost push inflation

 3. Increase in Employee Salaries

Wage push inflation

 Low unemployment Harder to replace Employee salaries Inflation
employees go up

4. Currency Depreciation
 Printing money Can also trigger Hyper Also due to political
inflation reasons

Now day Venezuela

And 2008-
Zimbabwe

 In Venezuela between 2016-2019,the inflation rate was more than 5 crore

percent!! 5,00,00,000%
=
1 US DOLLAR
 Scenario-1 (During covid)
Due to decrease in demand People were buying fewer People have no money
 Decreasing inflation Rate
of goods things and travelling less to spend due to shut
down of businesses

 Some countries started using the concept of cash transfer

Demand Inflation

Will free money lead to rapid inflation?

Is Inflation Necessary?

What if there was 0%

inflation?
 Companies would not raise your salaries Salary will remain constant Inflation stays positive

 Deflation=Negative inflation

Reduce spending Businesses start making Unemployment

losses

Stagflation-When countries economic growth is going down and country is going into recession but
inflation is increasing.
Relation between unemployment and inflation

High inflation-----Low unemployment

Low inflation-----High unemployment

Exception----During Hyperinflation
What is best level of inflation?
Developed countries----2%

For India----4% (+2% and -2% is considered healthy i.e. 2-6% )

Current inflation in India– 5.9%

 There is proper balance between prices and unemployment

How can governments control inflation?

 RBI controls inflation by increasing or decreasing interest rates

Higher repo rate---Banks increase interest rate----Less money in circulation---Low inflation

Lower repo rate---Banks decreases interest rate----More money in circulation----High inflation

 Printing notes can increase inflation

 Higher taxes can decrease inflation
 Government spending can control inflation
The Great Deflation (1870-1890)
United States
 Fall in goods price by 2% every year Economic boom

Both people and Businesses were making more money and

employment was on rise

Productivity increase due to technological progress

It compensated for the Deflation

Consequences of Inflation
 Negative consequences for common man
 That’s why people invest in Gold and Real-estate/property to avoid this

Conclusion:

 In reality, low inflation rate and an upward economic growth is never possible.
Nevertheless low inflation rate means slow economic growth. Whenever money is in
excess there is bidding by the consumers due to which the cost of goods escalate.
Survey results: (55 responses)
THANK YOU