DEFINITION

According to Crowther, Inflation is a state in which the value of money is falling i.e. prices are rising. 1.2 HOW TO MEASURE INFLATION? If the price level in the current year is P1 & in the previous year is Po, then inflation for the current year is

Inflation leads to persistent remarkable and continuous rise in general price level.

2. Inflation is a scarcity oriented. 3. Inflation is a dynamic phenomenon. It is not a state of high prices, but a process of rising prices.

4. Inflation is a state of disequilibria. It involves an imbalance between aggregate demand and aggregate supply.

5. Inflation is a pure monetary phenomenon.

6. Real inflation takes place only after full employment.

7. Inflation is a longer period phenomenon.

Inflation is often classified on three different criteria. Firstly, one might distinguish between various types of inflation on the basis of speed at which the general price level rises. Secondly, one way distinguishes between open and suppressed inflation. Finally, as we find in the modern macroeconomic theory, inflation is classified on the basis of the factors, which induce it.

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controlling the rates of commodity, we must know why these rates are rising i.e. inflating which means what are the reasons or causes behind inflation. There are various factors which causes inflation in the economy which is as follows A) Monetary Factors B) Non-monetary Factors C) Structural Factors.