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Measures of Inflation: Price & Inflation Video Lecture | SSC CGL Tier 2 - Study Material, Online Tests, Previous Year

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FAQs on Measures of Inflation: Price & Inflation Video Lecture - SSC CGL Tier 2 - Study Material, Online Tests, Previous Year

1. What is the difference between price and inflation?
Ans. Price refers to the amount of money required to purchase a good or service. Inflation, on the other hand, is the rate at which the general level of prices for goods and services rises, eroding purchasing power. In essence, while price is a specific monetary value, inflation is a measure of how that value changes over time.
2. How is inflation measured?
Ans. Inflation is commonly measured using various indices, the most popular being the Consumer Price Index (CPI) and the Producer Price Index (PPI). The CPI tracks the average change over time in the prices paid by consumers for a basket of goods and services, while the PPI measures the average change in selling prices received by domestic producers for their output.
3. What are the main causes of inflation?
Ans. The main causes of inflation can be classified into three categories: demand-pull inflation, cost-push inflation, and built-in inflation. Demand-pull inflation occurs when demand for goods and services exceeds supply. Cost-push inflation results from rising production costs, leading to higher prices for consumers. Built-in inflation arises from adaptive expectations, where businesses and workers expect prices to rise and adjust wages and prices accordingly.
4. What are the effects of inflation on the economy?
Ans. Inflation can have several effects on the economy, including reduced purchasing power, increased cost of living, and uncertainty in investment. While moderate inflation can stimulate spending and investment, high inflation can lead to decreased consumer confidence, higher interest rates, and a slowdown in economic growth.
5. How can individuals protect themselves from inflation?
Ans. Individuals can protect themselves from inflation by diversifying their investments, investing in assets that typically appreciate over time, such as real estate or stocks, and considering inflation-protected securities like TIPS (Treasury Inflation-Protected Securities). Additionally, maintaining a budget and being mindful of spending can help mitigate the impact of rising prices.
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