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Explanation
Thus from above mention definitions it is
concluded that inflation is a phenomenon where
by general price level rises consistently. If price
level suddenly jumps, this does not represent
inflation, rather inflation is a process of
continuous rise in prices.
Rate of inflation
The annual percentage change in price level
represents rate of inflation.
= ∆P × 100
P
Example
If price level was Rs 2 in 2006 and Rs 3 in 2007,
then inflation rate can be calculated as under,
Hyper Inflation
Suppressed Inflation
Stagflation
Deflation
Hyper Inflation:
High rate of inflation is prevailing in the country is called
hyper inflation.
Suppressed Inflation:
When prices are kept below their actual prices artificially
through Government control is called suppressed inflation.
Stagflation:
When unemployment and inflation exist
simultaneously, it is called stagflation.
Deflation:
It is the opposite of inflation and indicate the
situation of persistently falling prices and fall in the
money incomes of the factor of production
Methods to calculate inflation