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May 04, 2012

Inflation

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Persistent rise in the general price level or "fall in the value of money" is called inflation. Have a look at some important points about Inflation.
  • Price Level and purchasing power or value of money are inversely related.
  • Changes in price level are measured in terms of whole-sale price (WPI) Index.
  • WPI is released by the Department of Industrial Policy and Promotion.
  • WPI is constructed weekly since 1942 and shifted to monthly in Nov. 2009.
  • M.C.Singh is the Economic Advisor, Ministry of Committee and Industry.
  • The present no. of commodities in WPI in 4385, it increased to 676 items.
  • With effect from Sep. 14 2010, new series of WPI base year 2004-05, replaced 1993-94 base year series. Highest weight in this Index is given to manufactured items.
  • Abjhijit Sen Committee recommended this shift of base year.
  • Services remain excluded from WPI.
  • No. of Quotations selected for collecting price data for the items is 5482.
  • Weights : Primary articles : 20.12%, (decrease from 22.03%) manufactured products : 64.97% (increase from 63.75%) for construction of WPI.
  • Inflation first appeared in 2nd Plan.

Types of Inflation :

  • Demand - Pull Inflation : Aggregate demand is greater than aggregate supply. This results in Demand - Pull Inflation.

  • Cost - Push Inflation : Increase in cost of production leads to cost-push inflation. Under this comes 
    • Wage-push inflation
    • Profit-induced inflation
    • Increase in indirect taxes by Govt.
  • Mixed Inflation : Schultz proposed this. The features of Demand - Pull and Cost - Push inflation are found in this.
Stagflation  is a sustained increase in price-level and rising unemployment. 

Philips curve shows relationship between changes in wage rate and unemployment which is inverse.

Structural inflation refers to the inflation that arises as a result of supply inelasticity and structural rigidities in the industrial sector. "Double deflation" refers to recession occurring twice with a small gap in between. 

5.5% inflation is comfort zone according to RBI.




7 comments:

  1. mam plz upload materials for uiic...

    ReplyDelete
  2. plz upload its pdf version.. its very gud.. and I'm looking materials for the topic "national income" in a simple way.. its very complicated in most of the books..

    - Subhankar..

    ReplyDelete
  3. its great ma'am.. but plz upload its pdf version also provide materials on " national income" in a simple way.. thanks for all the valuable study-mats.. :)

    ReplyDelete
  4. not an elaborate one...need more discussion !!

    ReplyDelete

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