Presented by

Shaurya
Magotra
11-d
 Topics
• Introduction
• Definitions
• Causes of inflation
• Effects of inflation
• Types of inflation
• Inflation rate
• Controlling inflation
• Conclusion
 Meaning of inflation
• In economics, inflation is a rise in the general
level of prices of goods and services in an
economy over a period of time. When the
general price level rises, each unit of currency
buys fewer goods and services.
 Definitions of inflation
• According to Webster's “An increase in the
amount of currency in circulation, resulting in a
relatively sharp and sudden fall in its value and
rise in prices: it may be caused by an increasein
the volume of paper money issued or of gold
mined, or a relative increase in expenditures as
when the supply of goods fails to meet the
demand.
• According to Prof. Samuelson “inflation occurs
when general level of prices & cost are rising”.
 Causes of inflation
• Demand-pull inflation
• Cost-push inflation
• Built-in inflation
 Effects of inflation
• Investment
• Interest rates
• Exchange rates
• Unemployment
• Stocks
• Decrease in the purchasing power
• Change the allocation of income
 Types of inflation
1. On the basis of the degree of the govt
control
• Open inflation

• Suppressed inflation
2. on the basis of politicalconditions

War-time inflation Peace time inflation

3. On the basis of scope

• Sectoral inflation

• Comprehensive inflation
 Inflation rate
India Inflation Rate

• The inflation rate in India was last reported at 8.8 percent

in February of 2012.

• From 1969 until 2010, the average inflation rate in India

was 7.99 percent reaching an historical high of 34.68
percent in September of 1974 and a record low of -11.31
percent in May of 1976.
 Controlling inflation
There are broadly two ways of controlling inflation in an
economy:
•

1). Monetary measures

2). Fiscal measures

Monetary Measures

• The most important and commonly used method to control

inflation is monetary policy of the Central Bank. Most central
banks use high interest rates as the traditional way to fightor
prevent inflation.
Monetary measures used to controlinflation
include:
(i) bank rate policy
(ii) CRR
(iii) open market operations
II). Fiscal Measures
Fiscal measures to control inflation include
taxation, government expenditure and public
borrowings.
Fiscal measures used to control
inflation include:
(i) Increase in Taxes
(ii) Increase in savings
(iii) surplus budgets
 conclusion

In reality, low inflation rate andan upward economic

growth is neverpossible.
 Nevertheless, low inflation rate means slow economic
growth. Whenever, money is in excess, there is bidding by the
consumersdue to which the cost ofgoods escalate.