FR.

AGNEL SCHOOL

NEW DELHI

INFLATION

Name: Rishit Kumar

Class: XI-B

Roll No: 4

GR. No: 8080

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 ACKNOWLEDGEMENT

l extend my heartfelt gratitude to my teacher, Ms. Kriti for her guidance,

constant encouragement, and assistance during the course of preparation
of my project.
I am extremely thankful to Principal Fr. Roy D’sa , Fr. Agnel School,
New Delhi for his sincere support in the completion of my work.
I thank my family and friends for giving a helping hand in the successful
completion of the project.

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 CERTIFICATE

This is to certify that Rishit Kumar, student of class XI-A has

successfully completed the project on “Inflation” under the guidance of
Ms. Kriti on 15th January 2023.

Teacher’s Signature Student’s Signature

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 INDEX

1. Introduction
2. What is inflation
3. Types of Inflation
4. Effects of Inflation
5. Measures to Control Inflation
6. Conclusion
7. Bibliography

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 Introduction

We experience that sometimes prices go up higher than we expect. How

does this happen? How does this affect us? Can we measure or control
this? Is it beyond anyone’s control? We are going to study all these in
this document.

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 What is Inflation

In a market economy, prices for goods and services can always

change. Some prices rise; some prices fall. Inflation occurs when there
is a broad increase in the prices of goods and services, not just of
individual items; it means, you can buy less for ₹1 today than you
could yesterday. In other words, inflation reduces the value of the
currency over time.

Inflation is an increase in the general price level of goods and services

in an economy. When the general price level rises, each unit of currency
buys fewer goods and services; consequently, inflation corresponds to
a reduction in the purchasing power of money. Inflation is measured
by the Consumer Price Index (CPI) in India.

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 Types of Inflation

Demand-Pull Inflation

This type of inflation is caused due to an increase in aggregate demand

in the economy.
Demand-pull inflation occurs when the total demand for products and
services grows faster than the economy’s production capability.
It produces a demand-supply mismatch, with increased demand and
lower supply, resulting in higher prices.
This sort of inflation happens when the money supply expands;
government spending grows, indirect taxes fall, and so on.

Effects of Demand-Pull Inflation:

 Shortage in supply
 Increase in the prices of the goods (inflation).
 The overall increase in the cost of living.

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Cost-Push Inflation

This type of inflation is caused due to various reasons such as:

 Increase in price of inputs

 Hoarding and Speculation of commodities
 Defective Supply chain
 Increase in indirect taxes
 Depreciation of Currency
 Crude oil price fluctuation
 Defective food supply chain
 Low growth of Agricultural sector
 Food Inflation
 Interest rates increased by RBI

Cost pull inflation is considered bad among the two types of inflation.
Because the National Income is reduced along with the reduction in
supply in the Cost-push type of inflation.

Built-in Inflation

This type of inflation involves a high demand for wages by the workers
which the firms address by increasing the cost of goods and services
for the customers.

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Depending on the price increase inflation may be classed into mild
inflation, galloping inflation, hyperinflation, and so on.

Low Inflation

Low inflation is a term that refers to a period of time where prices are
slowly rising.
Creeping inflation is another name for this sort of inflation which
occurs when prices rise by less than 3% each year.

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Galloping Inflation

Galloping inflation occurs when the economy’s prices of goods and

services grow at a double-digit (i.e., 15%, etc.) or triple-digit (i.e., 100%,
etc.) pace each year.
Inflation that is galloping is also known as jumping inflation or running
inflation.

Hyperinflation

Hyperinflation occurs when the pace of growth in the prices of goods

and services is remarkably rapid and occurs over a short period of
time.
In other terms, hyperinflation occurs when prices rise at a pace of more
than three digits per year.

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 Effects of Inflation
General Effect

When the general level of prices rises, each monetary unit can buy
fewer goods and services in aggregate. The effect of inflation differs on
different sectors of the economy, with some sectors being adversely
affected while others benefitting.

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Positive Impacts

Increased Profits for Producers

Increased Investment Returns
Increase in production output
Increased Employment and Earnings
Shareholders income increases

Borrowers' Advantages
Governments tax revenue improves

Negative Impacts

Real-Income falls for groups with fixed income.

Income Distribution Inequality Rises
Disturbs the Planning Process

Increased Speculative Investment

Negative Impacts on Capital Accumulation
Lenders Will Sustain Losses
Rupee may depreciate

Export Earnings Suffer as a Result

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 Measures to control Inflation

Some of the important measures to control inflation are as follows: 1.

Monetary Measures 2. Fiscal Measures 3. Other Measures.

Monetary Measures

Monetary measures aim at reducing money incomes.

 Credit Control
 Demonetization of Currency
 Issue of New Currency

Fiscal Measures

Monetary policy alone is incapable of controlling inflation. It should,

therefore, be supplemented by fiscal measures. The principal fiscal
measures are the following:

 Reduction in Unnecessary Expenditure

 Increase in Taxes
 Increase in Savings
 Surplus Budgets
 Public Debt

Other Measures

The other types of measures are those which aim at increasing

aggregate supply and reducing aggregate demand directly.

 To Increase Production
 Rational Wage Policy
 Price Control
 Rationing

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 Conclusion

Inflation may be due to the supply of money exceeding its demand.

Other factors like a decrease in production, high expenditures on
consumer items, etc., can cause inflation if not matched with their
demand. There are different types of inflation – Hyperinflation,
creeping inflation, cost-push inflation, demand-pull inflation,
stagflation, etc. It is the steady rise of prices for goods and services
over a period, and has many effects. As inflation erodes the value of
cash, it encourages consumers to spend and stock up on items which
are slower to lose value. It decreases the cost of borrowing and lessens
unemployment.

Though inflation reduces the purchasing power of the households and

creates a demand-supply mismatch it is necessary to the economy.
Inflation as a result of an increase in demand for goods and services
will help in increased production and contribute to the growth of the
economy.

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 Bibliography

https://en.wikipedia.org/wiki/Inflation#Controlling_inflation

https://unacademy.com/content/upsc/study-
material/economy/inflation-in-india/

https://www.yourarticlelibrary.com/macro-economics/inflation-
macro-economics/controlling-inflation-3-important-measures-to-
control-inflation/31093

https://www.investopedia.com/terms/i/inflation.asp

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