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Meaning of Inflation

A general increase in prices of all the Commodities.

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Definitions

According to Crowthers inflation means a state in which the value of

money is falling ie prices are rising.

According to Pigou, inflation arises when

money income is expanding more than

proportionate to income earning activity.

According to Samuelson “ inflation occurs when general level of prices and cost are rising”.

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Types of Inflation

Demand Pull Inflation ( Due to high GDP and Low Unemployment).

Cost – Push Inflation ( due to adverse change in price in raw materials). Ex-oil

Pricing Power Inflation

Adaptive inflation/buit in inflation

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22/JAN/2009 RS=28-3522/JAN/2010 RS=80-94

22/JAN/2009 RS= 7-1022/JAN/2009 RS=16-24

22/JAN/2009 RS=22/KG22/JAN/2010 RS=52/KG

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Types of inflation according rate of inflation:-

Hyper inflation Creeping inflation

Walking inflation Running inflation

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Types of inflation:-

Open inflationSuppressed inflation

ACCORDING to the nature of time period of occurrence:-

1.war time inflation

2.post war inflation

3.peace time inflation

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Types of inflation:-

According to the cause:-1.credit inflation2. currency inflation3.Scarcity inflation4.Deficit inflation5.Profit inflation 6. Tax inflation7. Cost inflation

8. Demand inflation

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INFLATION EFFECTED COUNTRY ZIMBABABWE

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Cause of inflationIncrease in money supply

Expansion of bank credit

Deficit financing

Black money

Scarcity

Taxes

Increase in the supply of gold

Population growth

Entrepreneurial Bottle-neck12

Measurement of Inflation

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Wholesale Price Index (WPI)

Consumer Price Index (CPI)

Gross Domestic Product (GDP) Deflator

Anti –inflation measures:-

Anti-inflation

Fiscal measures

Price and wage control

indexation

Monetary measures

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Monetary measures

Traditional• Bank rate policy• Variable reserve ratio• Open market operation

Non-traditional• SLR• Moral Suasion• Selective Credit Control• Credit authorization scheme CAS

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Fiscal measures:-

Taxations of income

Cut Government expenditure16

Price and wage control:-

Price control

Wage control17

Indexation

• Indexing is a mechanism by which wages, prices, and contracts are partially or wholly compensated for changes in the general price level.

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19Presented by- Lalit Singh