Words of Wisdom:

"A chicken once had its head cut off and survived for over eighteen months, headless." - Jeffryma


  • Date Submitted: 11/10/2013 06:04 AM
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Meaning of inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time resulting in the decline of the value of money ie reduction in the purchasing power per unit of money It is a process of rising prices & not a state of high prices
Definitions of inflation
According to Prof. Samuelson “inflation occurs when general level of prices & cost are rising”.According to Gregory,` it is an increase in the quantity of purchasing power`.Johnson defines inflation,` as the increase in the quantity of money faster than the national output is expanding`
Measuring Inflation
It is measured as the rate   of change in the price level. If the price level in the current year is ‘P1’ & in the previous year is ‘Po’, then inflation for the current year is
(P1 – Po)/ Po x 100

Types of inflation
1. On the basis of the degree of the govt control
1.Open inflation
2.Suppressed inflation
When inflationary situation does not exhibit increases in the price level, due to price controls   introduced by the government. Such a situation is called suppressed inflation
Inflationary Situation in which no steps are taken to control rising prices is called open inflation
According to Milton,
“it is a process in which prices are allowed to rise without any attempt on part of government to control them. Under open inflation goods are distributed through price  mechanism. Price mechanism is a situation in which , those people who have large money to spend,  buy more goods.”

2.On the basis of Rate of inflation
  * Moderative Inflation
  * Running Inflation
  * Galloping Inflation
  * Hyper Inflation
3. On the basis of political conditions :
  1. War time inflation-
In order to meet the war expenses government increases the supply of   money. Large proportion of the...


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