Inflation

It’s price is

increases

How is it possible

It’s quality is as same as previous

Introducti

on

Shopkeeper

customer

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

Is it positive or negative ?

Causes of inflation

Are there affected on economy ?

How it calculated?

Is it Need in economy?

How inflation calculated

• Method of calculationWholesale Price Index (WPI)

Consumer Price Index (CPI)

110-100 x 100 100

Formula:

price at end of year – price at beginning of yearX 100WPI of beginning of year

Current price

Previous price

Previous price

Wholesale Price Index (WPI)

WPI is the index that is used to measure the change in the average price level of goods traded in wholesale market .

Formula:

WPI at end of year - WPI at beginning of yearX 100WPI of beginning of year

Consumer Price Index (CPI)

CPI is a statistical time-series measure of a weighted average of prices of a specified set of goods and services purchased by consumers.

Causes of inflation

Expansion of Money SupplyIncrease in Disposable Income

Increase in Indirect Taxes

Drop in exchange Rate

Rising Population Natural Calamities Speculation and Black Money

Unfair Practices by Monopoly Houses

Bottlenecks and Shortages

Non-monetary Factors

Effects of Inflation

Positive Effect

•Benefit the cartels formed by the companies•Benefit borrowers•Farmers Gain In Inflation

Negative Effect

•Lowers national saving•Rising prices of imports•Income diffusion effect•Illusions of making profits

Need of inflation

At the time it not caught we

will try.

It help to growth.

Affect on Economy

1.MonetaryMeasures

•Bank rate policy•Statutory Liquidity Ratio•Open market operation * Repo rate•Reverse repo rate * Cash Reserve Ratio

2.FiscalMeasures

• Taxation• Government expenditure• Public borrowings• Protectionist measures

3.OtherMeasures

• To Increase Production• Price Control

"Inflatio

n is the w

ay of g

rowth ."