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Page 1 • CPT General Economics Chapter - 6 Select Aspects of Indian Economy • CA. Dipti Lunawat Inflation Unit V[ Part1/2] Page 2 • CPT General Economics Chapter - 6 Select Aspects of Indian Economy • CA. Dipti Lunawat Inflation Unit V[ Part1/2] Learning Objectives Meaning & Types of Inflation Price Trends in India Causes of Inflation In India Measures to check Inflation Page 3 • CPT General Economics Chapter - 6 Select Aspects of Indian Economy • CA. Dipti Lunawat Inflation Unit V[ Part1/2] Learning Objectives Meaning & Types of Inflation Price Trends in India Causes of Inflation In India Measures to check Inflation Meaning of Inflation Persistent Upward movement in General price Level. Decline of Purchasing Power Page 4 • CPT General Economics Chapter - 6 Select Aspects of Indian Economy • CA. Dipti Lunawat Inflation Unit V[ Part1/2] Learning Objectives Meaning & Types of Inflation Price Trends in India Causes of Inflation In India Measures to check Inflation Meaning of Inflation Persistent Upward movement in General price Level. Decline of Purchasing Power Types of Inflation Inflation Demand – Pull Inflation Cost – Push Inflation Stagflation Page 5 • CPT General Economics Chapter - 6 Select Aspects of Indian Economy • CA. Dipti Lunawat Inflation Unit V[ Part1/2] Learning Objectives Meaning & Types of Inflation Price Trends in India Causes of Inflation In India Measures to check Inflation Meaning of Inflation Persistent Upward movement in General price Level. Decline of Purchasing Power Types of Inflation Inflation Demand – Pull Inflation Cost – Push Inflation Stagflation Demand Pull Inflation Demand Pull Inflation More money Chases Less Quantity Excess Demand Relative to Supply Increased Money Expenditure Demand for Goods & Services more than SupplyRead More
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FAQs on PPT - Inflation - Business Economics for CA Foundation
| 1. What is inflation and how does it affect the economy? |  |
Ans. Inflation refers to the sustained increase in the general price level of goods and services over a period of time. It reduces the purchasing power of money as more money is required to buy the same amount of goods and services. In an economy, inflation can have several effects such as eroding savings, increasing production costs for businesses, and making it difficult for consumers to plan their expenses.
| 2. What are the main causes of inflation? | |
Ans. There are various factors that can lead to inflation. Some of the main causes include an increase in the money supply, demand-pull inflation due to increased consumer spending, cost-push inflation caused by rising production costs, inflation expectations, and government policies such as excessive government spending or changes in taxation.
| 3. How is inflation measured and what are the commonly used measures? | |
Ans. Inflation is measured using various indices, with the Consumer Price Index (CPI) being one of the most commonly used measures. The CPI tracks changes in the prices of a basket of goods and services typically consumed by households. Other measures include the Producer Price Index (PPI), which measures changes in the prices of goods at the wholesale level, and the GDP deflator, which measures changes in the overall price level of goods and services produced within an economy.
| 4. What are the effects of high inflation on different sectors of the economy? | |
Ans. High inflation can have different effects on various sectors of the economy. For consumers, it leads to a decrease in purchasing power and can make it harder to afford basic necessities. Businesses may face higher production costs, which can reduce profitability and lead to lower investment and employment. Lenders and savers may suffer as the real value of money decreases, and the government may struggle to manage its finances due to rising costs.
| 5. How can inflation be controlled or managed by the government? | |
Ans. Governments can use various measures to control or manage inflation. One common approach is monetary policy, where central banks adjust interest rates to influence borrowing and spending. Increasing interest rates can reduce the money supply and cool down inflation. Fiscal policy, which involves adjusting government spending and taxation, can also be used to manage inflation. Additionally, the government can implement supply-side policies to address the root causes of inflation, such as improving productivity and reducing production costs.
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