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Inflation
Some definitions  ,[object Object],[object Object]
Criticisms  ,[object Object],[object Object]
Definitions (cont….) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object]
Meaning of Inflation ,[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object]
General Price  ,[object Object],[object Object],[object Object]
General Price Level ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Example  ,[object Object],Goods  Price  Weight Rice  Rs. 65 / kg 0.6 Shirt Rs. 1200 / piece 0.3 House (room) Rs.3000 / mon 0.1
General price in 1999 ,[object Object],[object Object]
Weights  ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Price Index   ,[object Object],[object Object],[object Object]
Example  ,[object Object],[object Object]
[object Object],[object Object],[object Object]
Price index of general price  ,[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object]
Laspeyre’s Index  ,[object Object],[object Object],[object Object]
Paasche’s Index  ,[object Object],[object Object],[object Object]
Laspeyre vs Paasche ,[object Object],[object Object],[object Object]
Inflation rate  ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object]
Example  ,[object Object],[object Object],[object Object],[object Object]
GDP Deflator ,[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object]
[object Object],Period  Rice Shirt House (room)   Price Quantity Price Quantity Price Quantity 2001 30 10,000 900 400 1,500 50 2009 65 12,000 1,200 500 3,000 75
Year Nominal GDP Real GDP GDP Deflator Base: 1991=1 2001 (30 x 10000) + (900 x 400) + (1500 x 50) = 735,000 (30 x 10000) + (900 x 400) + (1500 x 50) = 735,000 1 2009 (65 x 12000) + (1200 x 500) + (3000 x 75) = 1605,000 (30 x 12000) + (900 x 500) + (1500 x 75) = 922,500 1.739
Inflation Tax ,[object Object],[object Object],[object Object],[object Object]
Unemployment  Some concepts
Unemployment ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Kinds of Unemployment ,[object Object],[object Object],[object Object]
Open and Hidden ,[object Object],[object Object]
Kinds (cont….) ,[object Object],[object Object],[object Object]
[object Object],[object Object]
Hidden  ,[object Object],[object Object],[object Object]
Full Employment ,[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object]
Types of Inflation   Some classifications
Based on speed ,[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object]
Extent of inflation  ,[object Object],[object Object]
Government’s response ,[object Object],[object Object],[object Object]
[object Object],[object Object]
Based on money supply ,[object Object],[object Object],[object Object]
Ratchet Inflation  ,[object Object],[object Object]
Stagflation  ,[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object]
Theories of Inflation
Demand-Pull Inflation   ,[object Object],[object Object],[object Object]
[object Object],[object Object]
Demand Pull Inflation Y 0   S D 2 D 1 D 0 S P 0 P 1 P 2 Real Income  Price level
Cost Push Inflation  ,[object Object],[object Object],[object Object]
[object Object],[object Object]
Y 0 Y 1 Y 2 S 0 S 1 P 0 P 1 D 0 D 1 D 2 S
Inflationary Gap   ,[object Object],[object Object]
[object Object],[object Object],[object Object]
How an inflationary gap will arise in a war economy  Money income of the community  Rs. 1,000 cr Taxes Rs.  100 cr Disposable Income Rs.  900 cr GNP at pre-inflationary prices Rs. 1,100 cr War Expenditure Rs.  300 cr NNP available for civilian consumption Rs.  800 cr The inflationary gap Rs.  100 cr
Inflationary Gap Y 0 Y 1 E 0 E 1 G C+I C’+I’ C = Y Consumption, IG O
Limitations  ,[object Object],[object Object],[object Object],[object Object],[object Object]
Effects of Inflation
Effect on Production ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Effect on Distribution ,[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object]
Measures to Control Inflation
Monetary Policy   ,[object Object],[object Object],[object Object],[object Object],[object Object]
Fiscal Policy ,[object Object],[object Object],[object Object]
[object Object],[object Object]
Physical Policy   ,[object Object],[object Object],[object Object]

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12 inflation

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  • 27. Year Nominal GDP Real GDP GDP Deflator Base: 1991=1 2001 (30 x 10000) + (900 x 400) + (1500 x 50) = 735,000 (30 x 10000) + (900 x 400) + (1500 x 50) = 735,000 1 2009 (65 x 12000) + (1200 x 500) + (3000 x 75) = 1605,000 (30 x 12000) + (900 x 500) + (1500 x 75) = 922,500 1.739
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  • 29. Unemployment Some concepts
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  • 38. Types of Inflation Some classifications
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  • 52. Demand Pull Inflation Y 0 S D 2 D 1 D 0 S P 0 P 1 P 2 Real Income Price level
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  • 55. Y 0 Y 1 Y 2 S 0 S 1 P 0 P 1 D 0 D 1 D 2 S
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  • 58. How an inflationary gap will arise in a war economy Money income of the community Rs. 1,000 cr Taxes Rs. 100 cr Disposable Income Rs. 900 cr GNP at pre-inflationary prices Rs. 1,100 cr War Expenditure Rs. 300 cr NNP available for civilian consumption Rs. 800 cr The inflationary gap Rs. 100 cr
  • 59. Inflationary Gap Y 0 Y 1 E 0 E 1 G C+I C’+I’ C = Y Consumption, IG O
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  • 65. Measures to Control Inflation
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