Inflation

Inflation is a sustained increase in the general price level of goods and services, impacting the purchasing power of money across society.

Introduction

Inflation is the general rise in price levels that decreases money’s purchasing power and impacts all social strata.

Meaning Of Inflation

Inflation is the rate at which the general level of prices for goods and services rises, resulting in decreased purchasing power.

Types Of Inflation

This section outlines various types of inflation, categorized by rate and causes, providing insights into how each impacts the economy.

Based On Rate

This section outlines various types of inflation based on their rate of increase in prices, ranging from creeping inflation to hyperinflation.

Creeping Inflation

Creeping inflation is characterized by a slow and steady rise in prices, generally less than 3% per annum, which subtly erodes purchasing power over time.

Walking Inflation

Walking inflation denotes a moderate rise in prices, typically between 3% to 7%, which has significant implications for purchasing power.

Running Inflation

Running inflation refers to a rapid increase in prices, defined as a rise above 7%, impacting purchasing power and overall economic health.

Hyperinflation

Hyperinflation refers to extremely high and out-of-control price rises in an economy, severely eroding purchasing power.

Based On Causes

This section defines two primary types of inflation based on their causes: demand-pull and cost-push inflation.

Demand-Pull Inflation

Demand-pull inflation is driven by excessive demand in the economy that exceeds supply, leading to rising price levels.

Cost-Push Inflation

Cost-push inflation occurs when the costs of production increase, resulting in higher prices for goods and services.

Causes Of Inflation

This section discusses the various causes of inflation, highlighting how increased demand, rising production costs, supply chain disruptions, monetary factors, and deficit financing contribute to the phenomenon.

Increase In Demand

The increase in demand for goods and services can be attributed to factors such as higher incomes, population growth, and government spending, contributing significantly to inflation.

Increase In Cost Of Production

This section examines how increased costs in production factors such as wages and raw materials contribute to inflation.

Supply Chain Disruptions

Supply chain disruptions are significant events or conditions that hinder the smooth flow of goods and services, leading to inflationary pressures.

Monetary Factors

Monetary factors influencing inflation encompass the money supply and interest rates.

Deficit Financing

Deficit financing involves government borrowing or printing money to cover budget deficits.

Effects Of Inflation

This section outlines the various effects of inflation on consumers, producers, and the overall economy.

On Consumers

This section discusses how inflation affects consumers' purchasing power, particularly impacting those on fixed incomes.

On Producers

The section discusses the impact of inflation on producers, highlighting both the potential short-term benefits and long-term challenges.

On Economy

This section explores the impact of inflation on the economy, highlighting issues such as uncertainty in investment and income inequality.

Measures To Control Inflation

This section discusses various measures taken to control inflation, including monetary, fiscal, and supply-side strategies.

Monetary Measures

Monetary measures to control inflation include raising interest rates, reducing money supply, and increasing Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).

Fiscal Measures

Fiscal measures are government actions taken to control inflation by adjusting public expenditure and taxes.

Supply-Side Measures

Supply-side measures aim to address inflation by increasing production and reducing market manipulation.