Inflation
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| Money Indian Economy |
In the previous article, we studied how money is measured in the economy. In this article, we will understand what is inflation.
Price and economy
Value plays an important role in the operation of any economy. Changes in price are determined by the government 's market monitoring measures .There are different indexes used to measure this change in value.
Inflation:
The money in the market increased, so people got more money. So people start buying goods and services. Therefore, the demand for goods and services increases. Demanded that goods and services become expensive.
According to Irvin fisher's theory, prices increased because supply of money increased.
Also, there was inflation in prices that the price of the currency would be reduced.
For example, an ice cream was getting 10 rupees. As inflation continues, it gets 20 rupees. That means, for which a note of 10 rupees was required to be paid, two notes are required to be paid. That is, the cost of the currency is reduced.
Types of inflation
Grossly considered to be 4 types of inflation
types of inflation Annual average rate of inflation
Creeping up to 3%
Walking/Trotting 3% to 10%
Running/Galloping 10% to 20
Hyper/Runaway/Astronomical above 20%
The above four types of creeping inflation are considered to be beneficial for the economy. Because of this inflation, the demand increases due to the rise in inflation. And so the product gets its boost. Using the capital earned from the profits of the product, the company gets another profit after it gets promoted. New workers are recruited in this new business. This reduces unemployment.
If inflation is higher than 10%, then the demand does not increase if the price goes up too much. Therefore, it is not possible to develop Running/Galloping inflationary economy.
The wholesale price index is calculated to measure inflation. You will see the composition of the Wholesale Price Index in the next article
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