Inflation â€“ A Brief Note
1)Inflation â€“ meaning
Inflation means a reduction in the value of money; in other words, a rise in general price levels. If the amount of money in a country - the money supply - grows faster than production in that country, the average price will rise as a result of the increased demand for goods and services.
Inflation can also be caused by higher costs being charged on to the end-user. These might be raw material costs or production costs which have risen, but could also be higher tax rates. These price rises cause the value of money to fall. You can therefore buy less with the same amount of money. But this does not need to have an immediate effect on purchasing power. Purchasing power only declines if wages rises less rapidly than prices.
1. Demand pull
2. Cost push
3. Wage push
4. Imported inflation
Inflation causes increase of Interest, Inflation can be recognized as a combination of 4 factors :
â€¢ The Supply of money goes up
â€¢ The Supply of Goods goes down
â€¢ Demand for money goes down
â€¢ Demand for goods goes up
Our Indian government gets involved in it to control the inflation by adjusting the level of money in our economical system. The most noticeable way to increase the money flow in the system is to print more currency, then the rupees will become more relative to goods.
1. Rising wages
2. Import prices
3. Raw Material Prices
4. Profit Push Inflation
Post By : Marissa Navitha On: 28-02-2017