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defined as a persistent
and appreciable rise in
general level of food
prices over the period of
time
V It is also an erosion in the
purchasing power of
money
V When the price level
rises, each unit of
currency buys fewer
goods.
V `
When there is increase in aggregate
demand of goods not matched by aggregate supply it
results in rise of general price level
V `
government-By creating new money
, the purchasing power of commodity increases without a
simultaneous increase in the production of goods. This
leads to rise in the general price level.
V M
dIt occurs when there is increase in
input cost of production
V 2 Ànder
running inflation, the price
increases is about 8% to 10%
per annum.
V 3
When price level is
suppressed by the short
term measures like
rationing, it results in
many evils such black
marketing & corruption
V © when
the general price level rises
due to an increase in the
cost of production of goods
and partly due to rise in
supply of money before the
full employment stage is
reached.
V Full
inflation prevails when the
economy has reached the
level of full employment.
V WPI-Whole sale price index
V CPI-Consumer price index
V Difference between WPI & CPI represents the intensity & rate at
which inflation affects consumers.
è ©
M
è Changes in taxation
è Changes in ºovt. expenditure
è Public borrowing
è Balanced budget changes
è Control of deficit financing
£
V 43% of the personal disposable income goes into food products
V Prefer going for fixed deposits currently yielding only around 8-10%
V Credit rationing
[ It is a Traditional A roach
V Im ortant for the ºovernment to control the FPI
Abhinav Arora
Aditya Jain
ºur reet Singh
Karan Mehta
Kushal Badlani
Sahil Arora
Sushank Kukreja