Inflation affects the real economy in two specific areas: it can harm economic efficiency‚ and it can affect total output. We begin with the efficiency impacts:- Inflation impairs economic efficiency because it distorts prices and price signals. In a low inflation economy‚ if the market price of a good rises‚ both buyers and sellers know that there has been an actual change in supply and/or demand conditions for that good‚ and they can react appropriately. By contrast in a high inflation economy
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Objectives: How is inflation measured The calculation and limitations of these indices The effects of inflation Important points to remember: Consumer Price Index (CPI) - A measure of price changes in consumer goods and services such as gasoline‚ food‚ clothing and automobiles. The CPI measures price change from the perspective of the purchaser. GDP Deflator- measures price changes in current year compared to those in a base year‚ for all goods and services produced within the country and
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February‚ 2013 INFLATION BEHAVIOR: EVIDENCE FROM BANGLADESH Mohammad Zoynul Abedin1*‚ Fahmida – E – Moula2 and Shahnaz Parvin1* Mohammad Zoynul Abedin1*‚ Fahmida – E – Moula2 and Shahnaz Parvin (2013). Inflation Behavior: Evidence from Bangladesh. Bangladesh Res. Pub. J. 8(1): 07-17. Retrieve from http://www.bdresearchpublications.com/admin/journal/upload/1308102/1308102.pdf Abstract The rise in the inflation rate has prompted two views of the sources of higher inflation in Bangladesh. One
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INFLATION It can be stated that Inflation is the rise in prices of products as a result of the increase in the quantity of money. This definition however would be inefficient since for two reasons; 1. If we simply term inflation to be a rise in prices of certain products then we will be mistaken because prices might be rising in one sector of the economy yet falling in another sector. 2. We have to take into account that the process may be high this month but generally fall the following month
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Inflation “Inflation is the rate at which the general level of prices for goods and services is rising‚ and‚ subsequently‚ purchasing power is falling.” Central banks endeavour to put an end to grave inflation‚ along with drastic deflation‚ striving to keep the extravagant growth of prices at the lowest level. For example‚ if there is 5% inflation in a specific country and the price of sugar is usually £3‚ it will spontaneously escalate from £3 to £3.15. Every government’s tries to keep a low
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INFLATION: Inflation is a sustained increase in the general price level leading to a fall in the purchasing power of money. Inflationary pressures can come from domestic and external sources and from both the supply and demand side of the economy. FACTORS OF INFLATION: Inflation is defined as the rate (%) at which the general price level of goods and services is rising‚ causing purchasing power to fall. This is different from a rise and fall in the price of a particular good or service.
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Comparative Analysis of Inflation in Nepal and India Nepal Rastra Bank Research Department Baluwatar‚ Kathmandu 30 November 2011 Nepal Rastra Bank Research Department 30 November 2011 Comparative Analysis of Inflation in Nepal and India Background: Year-on-Year monthly variation of inflation‚ both in Nepal and India‚ seemed to be higher than expected at present situation. Inflation in Nepal is largely affected by rising food price in the country‚ which is a global phenomenon also
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INFLATION - ITS CAUSES and ITS EFFECTS ON VARIOUS SECTORS ON INDIA - September 2nd‚ 2010 WHAT IS INFLATION Defination: Inflation is defined as the rate at which the general level of prices for goods and services is rising and subsequently purchasing power is falling Measures of Inflation Inflation is measured by calculating the percentage rate of change of a price index‚ which is called the inflation rate. Consumer price indices Cost of living indices Producer price indices
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Major Cause of Inequality.“The origin of inflation is often found in the panicky nervousness of unstable governments in politically unstable communities. Given political stability there is no reason why India should not be able to carry out her future plans without generating serious inflationary pressure on the price level.” Keeping 1960-61 as the base year‚ the Fourth five year plan save the price index at an all time high of 331 in September 1974 (with 1961-62-100). This was due to a combination
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(b) Assess how monetary policy can be used to maintain a target of low inflation and currency stability in emerging markets? According to Jahan (2012)‚ monetary policy is the manner where the monetary authority uses to control the supply of the currency. The monetary policy objective of controlling the interest rate also takes an important role when government and monetary authority are dealing with the inflation (Shen‚ 2013‚ pp.199). The monetary authority usually is central bank with a certain
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