INFLATION AND STAGFLATION

• Inflation refers to an
continous increase or
rise in the price levels
of various
products,services and
commodities in the
economy,mainly
because the value of
money has fallen down.
• It thereby reduces the
purchasing power of
the consumers.
 FEATURES OF INFLATION
• Process of persistant rise in prices.
• Rising trend in the general price levels of
goods/services.
• Creates a state of disequilibrium in the
economy.
• Self generating.
• Influenced by number of factors.
• Caused by excess demand in relation to
supply of certain goods and services.
 CAUSES OF INFLATION
• Demand pull Inflation:-
• Its mainly caused by an
excess demand for goods
and services over their
supplies,either by
government or by general
public.
• Its also know as Demand-
Induced inflation.
FACTORS RESPONSIBLE FOR DEMAND
PULL INFLATION
• Increase in Money supply.
• Size of the population.
• Credit creation. ( Loan facility
etc.increases)
• Black money.
• Export trade.
• Public debt.( To be cleared)
 COST-PUSH INFLATION
• Its caused by a rise in the prices of Raw
materials,other components involved in
production ,thereby leading to an increase in
the cost of production,leading to rise in the
prices of the products and finally leading to
Inflation.
• So we can conclude that,when demand
increases,production takes place,even if the
supplies are available at a higher cost,thereby
finally leading to INFLATION.
 FACTORS RESPONSIBLE FOR COST-
PUSH INFLATION
• Higher Wages.
• Material costs.
• High Profit margin.
• Natural calamities.
• Scarcity/Shortage of goods/raw materials.
• Outdates techniques.
• Inefficiency in performance/low productivity.