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Inflation: Sunil Kumar 1
Inflation: Sunil Kumar 1
Sunil Kumar
Introduction
The fall in inflation rate helped Indian consumers, it had a negative impact on the economy. To minimize this negative impact, the RBI initiated various measures to increase money supply circulation in the economy. These measures aims at boosting aggregate demand.
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Types of Inflation
Creeping Inflation:
It leads to small increase in prices.
Running Inflation:
If creeping inflation continues for long period.
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Source of Inflation
Aggregate
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P1 P0 AD1
AD0
O Y0 Y2 Y1 X
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AD O Q1 Q0
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X
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Quantity
Measuring of Inflation
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The WPI is an indicator designed to measure the changes in the price level of commodities that flow into the wholesale trade intermediaries. The index is a vital guide in economic analysis and policy formulation. In India, the wholesale pries are used to measure inflation. The Office of the Economic Adviser (OEA) in the Ministry of Industry. The duration is usually one or two week. It will not cover non-commodity producing sector.
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each month, the arithmetic average price for each item in the market basket is derived first. The price relative or index for each commodity is then taken by dividing the computed arithmetic average price by the corresponding average base price as: PRi= (Pn i/P0i) x 100
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index of the subgroup of the commodities is computed using the following formula: i i PRi= PRij /N The index of the next subgroup of commodities is computed by dividing the aggregate of weighted indices of component item in a subgroup by the total of their corresponding weights as: PRk=(PRjk x Wjk) / Wjk
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CPI-IW (for industrial workers) CPI-AL (for agricultural laborer) CPI-UNME (for urban non-manual employee)
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Phillips Curve
The two variables that receive the most attention in macroeconomics are unemployment and inflation. Philips curve indicates the relation between inflation and unemployment rate. The Philips curve indicates a trade- off between inflation and unemployment.
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Inflation 5 3 O
X
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UnemploymentKumar Sunil
Inflation
X
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UnemploymentKumar Sunil
Other Measures
Price control and rationing Wage policy
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