INTRODUCTION Inflation is simply defined (in Economics) as too many

rupees chasing too few goods.

Inflation generally described as “a state of in balance between the marketed stock of basic goods or basic commodities and active stock of money”.

A small rise in price can not be called inflation it is persistent and appreciable rise in price which can called inflation

TYPES OF INFLATION

CREEPING INFLATION RUNNING INFLATION GALLOPING INFLATION HYPER INFLATION

sources of inflation

•Demand-pull

•Cost-push

MESURE OF INFLATION Whole sale price index (WPI) Consumer price index (CPI) Retail price index (RPI)

In India economist use WPI method for measuring inflation rate.

• The Glossary of Economics Terms defines deflation as occurring "when prices are declining over time. This is the opposite of inflation; when the inflation rate (by some measure) is negative, the economy is in a deflationary period.’’• When a deflation in asset, it converts into depression

Causes of Depression

The specific economic events that took place during the great depression have been studied thoroughly: A deflation in asset and commodity prices , dramatic drops in demand and credit, and disruption of trade , ultimately resulting in wide spread poverty and unemployment.

INFLATION V/S DEFLATIONINFLATION DEFLATION Marginal efficiency of capital

increases & investment is increased

Value of money is falling & prices are increasing

Redistribute income & wealth in un just manner but national income rises

Post full employment concept Easy to control inflation by

monitory & fiscal policies

Marginal efficiency of capital diminishes & investments reduced

Value of money is rising & price are falling

Reduces the national income

Under employment concept Difficult to control from

deflation

• Some developing countries struggle with high rate inflation.• Zimbabwe as the highest inflation rate (consumer prices) (%) in the WORLD which reaches 26,470 which is ridiculously high as that is 10,000 times the inflation here in the UK!

IMPACT OF INFLATION IN INDIA Increasing uncertainty may discourage investment and

saving : Impact on Household Sector inflation directly reduces

the purchasing power of the household sector

: Impact on Business Sector Moderate inflation (2-3%) good, initially-Firms benefit from rising prices. Soon, demand falls as consumers reduce consumption.

: Impact on Debtors and Creditors Redistribution of income from creditors to debtors-repaid debt in depreciated value as purchasing power has eroded to the extent of inflation.

IMPACT OF DEFLATION IN INDIA The great depression of 1929 have severe impact on

India . It had a caused great damages in Indian economy like export import , agriculture , railway , etc.

India suffered badly due to the Great Depression. The price decline from late 1929 to October 1931 was 36 percent compared to 27 percent in the United Kingdom and 26 percent in the United States

Why is inflation such a problem? It creates uncertainty in terms of what the money you earn

today will buy tomorrow. Uncertainty, in turn, discourages productive activity,

saving and investing. The effects inflation at first glance can be rather

unnoticeable however over time it gradually builds up and starts to corrode your savings.