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Inflation - Coggle Diagram
Inflation
Terms
Disinflation
Deflation
Inflation
Reflation
Inflationary gap
Deflationary gap
Overheating of the economy
Suppressed inflation
Open inflation
Structural inflation
stagflation
Misery index
phillips curve
Skewflation
Agrifaltion
Headline inflation
Core inflation
Inflation tax
Creeping inflation
Walking inflation
Running inflation
Galloping inflation
Run away inflation
Constraints in controlling inflation
changing crude oil price is not in the hands of the govt
political constraints over budgetry deficits
supply side measures, not effective in short run
constraints of MP
Meaning
Too much money chasing too few goods
It reduces purchasing power
Types
Demand pull inflation
increase in AD
Causes
Measures
MP
contractionary
FP
contractionary
govt expenditrues
govt debt
Taxes
Cost push inflation
decrease in AS
Causes
Measures
reforms in supply chain
restrictions on hoarding & speculation
fixing ceiling prices
increasing production
selling short supply commodities through PDS
Restrictions on export
encouraging production by increasing MSP
increasing imports
releasing commodities form buffer stocks
Impact
Positive
Increases profit of the firms
Indicates that there is no deficiency of demand
Moderate level stimulates eco growth
phillips curve
as inflation increases unemployment rate decreases
But, effective only in the short run
Negative
Economic impact
retards eco growth
retards capital formation
Reduces real interest rate
promotes non-productive investments
Govt measures to tackle it
Inflation indexed bonds (2013)
Sovereign gold bonds (2015)
Gold monetisation scheme (2015)
Impact on BOP
Discourages exports & encourages imports
Social impact
Regressive
increases inequality
decreases std of living
Distortion in resource allociation
diverts resources towards high profit area & increases resource wastage
Increases malpractice
Tax evasion
promotes hoarding & speculation
Measurements of inflation
WPI
M. commerce & industry
Base year-2011-12
monthly basis
Commodity groups included
fuel & power
Manufactured items
primary articles
services & indirect taxes not included
depicts inflation on economy
Criteria for fixing weightage
Share in total production
Engle's law
Estimation of Inflation
Point to point method
52- week Avg inflation
Changes made in 2017
CPI
Old CPI
CPI-UNME
CPI-AC
CPI-IW
M. labour & employment
Base year__2016
CPI-RL
New CPI
CPI--urban
CPI--rural
CPI--combined
Base year-2012
Monthly basis
Why there is difference btw WPI and CPI inflation?
Retail average
Criteria for fixing weightages
share in total expenditure
since 2014, used for MP formulation
New indices to Measure food inflation
CFPI-rural
CPFI-combined
CFPI-urban
used for granting dearness allowances
Proposed indices
Producer price Index (PPI)
pros of introducing PPI
BN.Golder committee
depicts inflation on people
Trend of Inflation
Impact of reduction in crude oil prices
Base effect