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What is Inflation?
Purchasing power is the value of a currency expressed in terms of the number of goods or services that one unit of money can buy. All else being equal, inflation decreases the number of goods or services we would be able to purchase.
For example, if one had taken one unit of currency to a store in the 1950s, it would have been possible to buy a greater number of items than would be the case today, indicating that the currency had a greater purchasing power in the 1950s.
If one's monetary income stays the same, but the price level increases, the purchasing power of that income falls.
Note: Inflation does not always imply falling purchasing power of one's money income since income may rise faster than the price level. A higher real income means a higher purchasing power since real income refers to the income adjusted for inflation. |
Measures of Inflation in India
Consumer Price Index
Who maintains Consumer Price Index in India?
WPI
Who publishes WPI in India and what does it show?
GDP Deflator
Causes of Inflation
Following are some of the chief reasons for the increase in prices:
Is Inflation bad for everyone?
Why is moderate rate of inflation good for an economy?
Types of Inflation
Creeping Inflation
Walking inflation
Running Inflation
Galloping Inflation
Hyperinflation
Stagflation
Stagflation is a combination of stagnant economic growth, high unemployment, and high inflation.
Causes of stagflation
Disinflation
Deflation
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