5 Basicseconomy Inflation

  Qts 1 .What is meant by Inflation 

It is defined as a sustained increase in the general level of prices for goods and services for a specific time and has impact on other commodity/ service. It is measured as an annual percentage increase.

Qts 2 What is Creeping inflation 

If the intensity of inflation (general rise in prices) at very low rates, which is usually between 0.1 to 2 per cent annually. This stage refers to be creeping inflation.

Qts 3 Trotting Inflation:

Trotting inflation also refers to be Walking and Running Inflation. Here the intensity and magnitude of inflation lies between 5 to 10 per cent annually. At this level, it is a warning signal for most governments to take measures to avoid exceeding double - digit figures.

Qts 3 What is Galloping Inflation: 

The severity of inflation ranges between 10 to 20 per cent annually. This range is known as Galloping Inflation. Other names to this inflation hopping inflation, jumping inflation and runaway inflation.

Qts 4 What is Hyper Inflation : 

When the inflation rate rises to over 20% it is generally considered as hyper inflation. 

The best example of hyper inflation that economists cite is of Germany after the first world war in early 1919s. At the end of 1923, prices were 36 billion times higher than two years earlier.

Qts 5 What is Agflation: 

The term is derived from a combination of the words agriculture and inflation. An increase in the price of food that occurs as a result of increased demand for human consumption.

Qts 6  What is Deflation: 

A general decline in prices, often caused by a reduction in the supply of money or credit.

 Deflation can be caused by a decrease in government, personal or investment spending.

 Qts 7 What is Stagflation

A condition of slow economic growth and relatively high unemployment

 Qts 8 What is Disinflation:

Disinflation is used to describe instances when the inflation rate has reduced marginally over the short term. A slowing in the rate of price inflation.

 Qts 9 What is Reflation:

 Reflation is the act of stimulating the economy by increasing the money supply or by reducing taxes. It is the opposite of disinflation.

 Qts 10 What is Demand Pull Inflation: 

A mismatch between demand and supply pulls up prices. Either the demand increases over the same level of supply or the supply decreases with the same level of demand and thus the situation of demand-pull inflation arise.

This phenomenon occurs due to following reasons due to below given reasons 

Wage revision,

Printing of more Currency ,

 Public Borrowing without equivalent creation in production/supply,

Black Market

Failure of Monsoon.

Qts 11 What is Cost-Push Inflation: 

An increase in factor input costs (i.e. wages and raw materials) pushes up prices.

The price rise which is the result of increase in the production cost is cost-push inflation.

This happens mainly due to:

(i) Increase of prices in raw materials in International market; 

(ii) Frequent strike called by the trade union to raise the wage; 

(iii) Higher Tax rate on raw materials; 

Qts 12 What is Administered Price inflation.

 This occurs when business and individuals raise their prices retrospectively to increase their profits 

Qts 13 What is Sectoral Inflation: 

This occurs when the price of one product directly affects the price of another product or service.

Qts 14  What us Wholesale Price Index (WPI)

This Index is prepared by Department of Industrial Policy and Promotion (DIPP) under the Ministry of Commerce and Industry.

It measures the change in wholesale prices ( as per current base year) on monthly  basis.

Qts 15  What is Consumer Price Index (CPI)

It is Prepared by Central Statistics Office (CSO) under the Ministry of Statistics and Programme Implementation.

 It measures the change in retail prices on monthly basis.

CPI includes both goods as well as services. 

This index covers commodities and reflects the cost of living of the concerned category of consumer.

Qts 16 What is Index of Industrial Production:

It measures the growth of industrial production in India.

 This index classifies industries into mining, manufacturing and electricity sectors and measures growth in production in each industry; 

This helps in predicting GDP growth of Industry and IIP is released by CSO on a monthly basis.

 Qts 17 What is Purchasing Manager's Index (PMI):

It Predicts the level of industrial production in advance;

 This is done by surveying purchasing executives over 500 manufacturing companies in India.

 It released by Market, a global financial information service company

 Qts 18 What is GDP  Deflator:

GDP deflator is a measure of the price of all the goods and services included in Gross Domestic Product (GDP).

Qts 19 What is Phillips Curve:

Phillips curve is a historical inverse relationship between the rate of unemployment and the rate of inflation in an economy.