Inflation And Deflation-Issues In Macro Economics-Lecture Slides, Slides of Macroeconomics

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InflatIon & deflatIon

impact on economy

InflatIon & deflatIon

impact on economy

Introduction

Prices 2008 commodity Prices 1956

Rs.15/kg rice 0.30/kg

Rs.12/kg wheat 0.25/kg

300/kg almond 3/kg

8/kg potato 0.20/kg

Intro……………

 sItuatIon of rapId general Increase In prIce leVel.

 declIne In the Value of Money.

types of InflatIon

deMand – pull InflatIon:  due to hIgh gdp and low uneMployMent.

supply shock InflatIon:

 due to adVerse change In prIce of raw MaterIals ( lIke oIl).

BuIlt In InflatIon:

 Induced By expectatIons Based on preVIous InflatIon leVels.

causes of InflatIon

 Increases In Money supply.

 expansIon of Bank credIt.

 defIcIt fInancIng.

 Black Money.

 scarcIty.

 taxes.

 populatIon growth.

deflatIon

 a general declIne In prIce often caused By a reductIon In the supply of Money or credIt.

 deflatIon can Be caused also By decrease In goVernMent , personal or InVestMent spendIng.

 deflatIon has the sIde effect of Increased uneMployMent.

causes of deflatIon

 decreasIng Money supply.

 IncreasIng supply of goods.

 decreasIng deMand of goods.

 IncreasIng deMand for Money.

Cont…

 Business starts to dry up & employers find themselves cutting down on staff.  Our fixed income gets depleted & we find ourselves having to survive on even less.  The quality or standard of life that many have grown, downgrades as a direct result of inflation.

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