Inflation Project
Inflation Project
Inflation Project
Inflation Concept
Inflation is a situation where general
price increases consistently and value of
money goes on to fall.
When price level increases people’s
purchasing power decreases. Because of
this the firms have to make more
payments to the owners of resources in
the form of wages, rent and interest.
Because of this money circulation
increases, As a result prices keeps on
increasing and value of money decreases.
Definition
According to Prof Ackly Garden
Explanation
Thus from above mention definitions it is
concluded that inflation is a phenomenon where
by general price level rises consistently. If price
level suddenly jumps, this does not represent
inflation, rather inflation is a process of
continuous rise in prices.
Rate of inflation
The annual percentage change in price level
represents rate of inflation.
= ∆P × 100
P
Example
If price level was Rs 2 in 2006 and Rs 3 in 2007,
then inflation rate can be calculated as under,
Hyper Inflation
Suppressed Inflation
Stagflation
Deflation
Hyper Inflation:
High rate of inflation is prevailing in the country is called
hyper inflation.
Suppressed Inflation:
When prices are kept below their actual prices artificially
through Government control is called suppressed inflation.
Stagflation:
When unemployment and inflation exist
simultaneously, it is called stagflation.
Deflation:
It is the opposite of inflation and indicate the
situation of persistently falling prices and fall in the
money incomes of the factor of production
Methods to calculate inflation