Inflation

Views:
 
Category: Entertainment
     
 

Presentation Description

XI Economics CBSE

Comments

Presentation Transcript

PowerPoint Presentation:

Inflation in india 12/16/2014 7:13 AM 1 Ghanshyam iilm gurgaon

INFLATION:

INFLATION “Inflation is nothing more than a sharp upward rise in price level.” Too much money chasing, too few goods.” Inflation is a state in which the value of money is falling i.e. price are rising.” 12/16/2014 7:13 AM 2 Ghanshyam iilm gurgaon

Definition:

Definition Inflation is a situation of increase in the general price level over a period of time. It is an expansion in the supply of money relatyive to the supply of things to purchase. According to Keynes “Inflation is an imbalance between aggregate demand and agregate supply then price will go on rising” 12/16/2014 7:13 AM Ghanshyam iilm gurgaon 3

Indicators of Inflation:

Indicators of Inflation 1.Index Number of Prices Wholesale Price Index (WPI): It measures the change in wholesale prices on weekly basis. On the basis of weekly indices, average annual WPI is workedout. (Sample of 435 Goods) Consumer Price Index (CPI): It measures the change in retail prices on monthly basis. On the basis of monthly indices, average annual CPI is worked out. It includes both goods as well as services. 12/16/2014 7:13 AM 4 Ghanshyam iilm gurgaon

PowerPoint Presentation:

The  consumer price index  measures the change in the retail prices of approximately 80,000 specific goods and services, called the market basket. The goods and services fall into eight major categories: food and beverage, housing, apparel, transportation, medical care, recreation, education and communication, and other. The BLS ( Bureau of Labor Statistics )  updates the market basket every few years to remove obsolete items. 12/16/2014 7:13 AM Ghanshyam iilm gurgaon 5

Weight edge to CPI & WPI:

Weight edge to CPI & WPI 12/16/2014 7:13 AM 6 Ghanshyam iilm gurgaon

2. GDP Deflator:

2. GDP Deflator In economics, the  GDP deflator  (implicit price deflator for GDP) is a measure of the level of prices of all new, domestically produced, final goods and services in an economy. GDP stands for  gross domestic product , the total value of all final goods and services produced within that economy during a specified period. 12/16/2014 7:13 AM Ghanshyam iilm gurgaon 7

PowerPoint Presentation:

2. Gross Domestic Product (GDP) Deflator: It refers to the ration between GDP at current prices and GDP at Constant Prices GDP at Current Prices GDP Deflator = ----------------------------- GDP at Constant Prices If GDP at Current Price = GDP at constant Prices; Deflator = 1 That implice no change in price level 12/16/2014 7:13 AM Ghanshyam iilm gurgaon 8

TYPES OF INFLATION / CAUSES OF INFLATION:

TYPES OF INFLATION / CAUSES OF INFLATION Demand pull inflation: Cost push inflation 12/16/2014 7:13 AM 9 Ghanshyam iilm gurgaon

COST PUSH INFLATION:

COST PUSH INFLATION It occurs when rise in price is due to higher costs of production and higher cost of raw materials. It is determined by supply side factors. Cost push inflation can lead to lower economic growth and often causes a fall in living standards, through it often proves to be temporary. 12/16/2014 7:13 AM Ghanshyam iilm gurgaon 10

PowerPoint Presentation:

Cost-push Inflation 12/16/2014 7:13 AM 11 Ghanshyam iilm gurgaon

Cause of Cost push Inflation :

Cause of Cost push Inflation A devalution will increase the domestic price of imports. Therefore, after a devaluation we often get an increase in inflation due to rising cost of imports. Wages are the one of the main cost paid by the firms. Rise in wages will push up prices as firms have to pay higher wages to the labour. Higher VAT and excise duties will increase the prices of goods. An increase in price of inputs by the government raises the general price index. 12/16/2014 7:13 AM Ghanshyam iilm gurgaon 12

General Price Index:

General Price Index A  price index  ( plural : “price indices” or “price indexes”) is a normalized average (typically a  weighted  average) of price relatives for a given class of goods or services in a given region, during a given interval of time. It is a statistic designed to help to compare how these price relatives, taken as a whole, differ between time periods or geographical locations. 12/16/2014 7:13 AM Ghanshyam iilm gurgaon 13

Demand Pull Inflation:

Demand Pull Inflation It arises when there is and excess of demand for goods over their supply. Causes of Demand Pull Inflation Increase in population raises the number of consumers in the market. This in turn, raises demand for goods. Increase in money supply by the RBI, raises the money in circulation, which in turn raises demand for goods. When the common man has more money at his disposal, he will demand more goods. 12/16/2014 7:13 AM Ghanshyam iilm gurgaon 14

PowerPoint Presentation:

Demand-pull Inflation 15 Ghanshyam iilm gurgaon

Problems of Inflaiton and Priventive Measures:

Problems of Inflaiton and Priventive Measures 1.Adverse Impact on Balance of Payment(BOP) 2.Promotion of Inequalities 3.Adverse Effect on the People with Fixed income 4.Encourages Speculation 5.Impact on Foreign Direct Investment(FDI) Cost of Inputs Purchasing power of Consumers 6.Reduce Capital Formation 7.Wastefull allocation of Resources 2.Fiscal Measures Other Measures 12/16/2014 7:13 AM 16 Ghanshyam iilm gurgaon

PowerPoint Presentation:

12/16/2014 7:13 AM Ghanshyam iilm gurgaon 17 The balance of payments (BOP): BoP of a country is the record of all economic transactions between the residents of a country and the rest of the world in a particular period (over a quarter of a year or more commonly over a year). These transactions are made by individuals, firms and government bodies. Thus the balance of payments includes all external visible and non-visible transactions of a country during a given period, usually a year. It represents a summation of country's current demand and supply of the claims on foreign currencies and of foreign claims on its currency

PowerPoint Presentation:

2006-2007 2007-2008 Inflation 7.8 12.0 Food inflation 10.3 17.6 Non-food inflation 6.2 6.8 INFLATION RATES 12/16/2014 7:13 AM 18 Ghanshyam iilm gurgaon

Government Polilcies Measures to Control Inflation:

Government Polilcies Measures to Control Inflation Price Polocies: It refers to the policy of directing, regulating and controlling the prices of goods and services in the economy. 1.Price control of essential goods: prices of certian essential goods are controlled with a view to ensure their availability to all sections of the society. 2.procurement of support price: Procurment price refers to price fixed by government at which it procures a part of the prodcution. Eg: Agri Products. Support price is that price which is offered by the governmnet to the farmes for the purchase of their surples output. 12/16/2014 7:13 AM 19 Ghanshyam iilm gurgaon

2.Monetroy Policies:

2.Monetroy Policies Monetory measures relate to the control in the supply and circulation of money in the country. 1.Bank Rate Policy: Bank rate is defined as the rate of interest at which the RBI lends to the Commerical Bank. 2.Open Market Operation: It is defined as buying and selling of eligible securities in the bill market by the RBI. 3.Variable Reserve Ration CRR: Creidt reserve ration defiend ast that protion of total deposits which a commercial bank is required to keep with the RBI in the form of cash reserve. Statutory Reserve Ratio(SLR): It is defined as that protion of total deposits which a commerical bank has to keep with itself in the form of liquid assets. 12/16/2014 7:13 AM Ghanshyam iilm gurgaon 20

3.Fiscal Policies :

3.Fiscal Policies 1.Public Revenues: In a situation of inflation, government raises the rate of all taxes. This reduces the purchasing power, which, reduces aggregate demand. 2.Public Expenditures: I nflation is also conrolled by decreasing the public expenditures by the government. 12/16/2014 7:13 AM Ghanshyam iilm gurgaon 21

General Measures to Control Inflation:

General Measures to Control Inflation Increase in supply of goods and services Population Planning Price Control Policy Economic Planning Control money suppy 12/16/2014 7:13 AM Ghanshyam iilm gurgaon 22

PowerPoint Presentation:

T 12/16/2014 7:13 AM 23 Ghanshyam iilm gurgaon

authorStream Live Help