Inflation

(1) On The Basis Of Causes(2) Anticipated V/S unanticipated

inflation(3)On The Basis Of rate Of Inflation(4)On The Basis Of degree Of control(5) On The Basis Of Employment

1)Demand Pull Inflation2)Cost Push Inflation3)Profit Induced Inflation4)Budgetary Inflation5)Monetary Inflation6)Multi Casual Inflation

1) Inflation Caused by increasing in aggregate demand.

1) Increase in money supply.2) Increase in the demand for goods by

the govt.3) Increase the income of various factor

of production.

Increase in cost of production.

Entrepreneurs due to their monopoly position raise the profit margin on goods.

Country covers the budget deficits through bank borrowings and creating now money. Purchasing power of community increases without a increase in production of goods.

Inflation is caused by too rapid increase in money supply

Rate of inflation which majority of the individuals believe will occur.

Rate of inflation which comes as a surprise to majority of individuals.

2)Anticipated V/s Unanticipated

(1)Creeping inflation(2)Walking inflation (3)Running inflation(4)Hyper inflation

(1) General prices level increases upto a rate of 2% per annum.(2) It is generally considered a necessary condition of economic

growth.

The price rise is around 5% annualy.

The price increases about 8 to 10% per annum.

(1) It starts after the level of full employment is reached.(2) Price level rises very rapidly within a short period.

(1)Open Inflation(2)Suppressed Inflation

Inflationary process in which prices are permitted to rise without being suppressed by government price control or similar measures.

(1) Govt. makes efforts to check and control the rise in price level through price control and rationing.

(2) Suppressed inflation results many evils such as black marketing, hoarding, corruption and profiteering.

(1)Partial inflation(2)Full inflation

(1) General Price level raises partly due to an increase In cost of Production

(2) And partly due to rise in supply of money before the full employment stage is reached.

(1) Economy reaches the level of full employment.(2) Increase in money supply will result in the rise in price

level without any increase in output and employment.

While inflation represents anoverall upward pricemovement of goods andservices, deflation actsadversely. We take a look atthe basics of both.

Inflation is a rise in the general level of prices of goods and services in an economy over a period of time

- An increase in the general level of prices.- decrease in the purchasing power of the

currency.- High or unpredictable inflation rates are

regarded as harmful to an overall economy.- make it difficult for companies to budget or plan

long-term.- affect the balance of trade.- negative impacts to trade from an increased

instability in currency exchange prices caused by unpredictable inflation.

Deflation is a decrease in the general price level of goods and services.

Deflation occurs when the inflation rate falls below 0% (a negative inflation rate).

Deflation is a problem in a modern economy because it may aggravate recessions and lead to a deflationary spiral.

The effects of deflation are:1 Decreasing nominal prices for goods and services.2 Increasing buying power of cash money and all assets denominated in cash terms.3 May decrease investment and lending if cash holdings are seen as preferable.4 Benefits recipients of fixed incomes.

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