inflation and types of inflation pdf

Inflation And Types Of Inflation Pdf

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Inflation means a sustained increase in the general price level. The main two types of inflation are.

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The common measure of inflation is the inflation rate , the annualized percentage change in a general price index , usually the consumer price index , over time. Economists believe that very high rates of inflation and hyperinflation are harmful, and are caused by an excessive growth of the money supply. Low or moderate inflation may be attributed to fluctuations in real demand for goods and services, or changes in available supplies such as during scarcities. Inflation affects economies in various positive and negative ways. The negative effects of inflation include an increase in the opportunity cost of holding money, uncertainty over future inflation which may discourage investment and savings, and if inflation were rapid enough, shortages of goods as consumers begin hoarding out of concern that prices will increase in the future.

Types of Inflation

Inflation is when the prices of goods and services increase. There are four main types of inflation, categorized by their speed. They are creeping, walking, galloping, and hyperinflation. This kind of mild inflation makes consumers expect that prices will keep going up. Consumers buy now to beat higher future prices. That's how mild inflation drives economic expansion. It is harmful to the economy because it heats-up economic growth too fast.

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Different types of inflation explained

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Inflation is the rise in price levels of the commodities we use due to rising in price levels in the economy consequent devaluation of the currency and not because of improvements in the quality or quantity of the commodities. A pencil which used to cost less than Rs 1 decades back, now costs more than Rs 10, without any value additions since then. The Central Statistical Office has categorized inflation indices as the consumer price index CPI and the wholesale price index WPI , charting Inflation on retail and wholesale prices of different commodities, respectively. Inflation can occur due to the prices of commodities used in the production of final goods and services, such as rising oil prices affecting transport costs, or Inflation could stem from demand surpassing supply, created by, say, an interest rate cut making credit available cheaply and boosting demand while supply remains limited in the short term. Inflation is the rise in the prices of goods and services, which includes day to day fundamental items such as food, transport, clothing, housing, etc.

Inflation is defined as a sustained rise in the general level of prices of goods and services over time. It is caused by disequilibrium between aggregate supply and aggregate demand. The price rise should be persistent over the period of time to be said as inflation. Inflation is measured by price index. A price index is a weighted average of prices of number of goods and services; therefore it does not represent the price of single item. There are two types of price indices:. Depending upon the rate of increase in price level, Inflation may be classified into three categories:.

What Is Inflation (Definition) – Causes & Effects of Rate on Prices & Interest

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3 comments

Numessubsclas

INFLATION. Measures. Types. Causes. Effects Inflation measures how much more expensive a set of goods and services has become over a certain period.

REPLY

Saville V.

Inflation figures are reported each month.

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