Today in our 6th economics class we saw the
continuation of last class topics
CORE REFLATION:
It
shows price rise in all goods and services excluding food and energy.
WAGE-PRICE SPIRAL:
When
wages increase demands for goods increase there by increasing the prices of
goods which in turn increase the wage and the circle goes on.
PHILLIPS CURVE:
This
curve represents the relationship between inflation and unemployment.
The inference from this curve is that “If inflation
increases then unemployment decreases” inflation at optimum level create jobs
but beyond this level situation will be reversed.
METHODS OF MEASURING INFLATION:
(1)WPI [Wholesale Price Index]
·
Published by office of economic
adviser DPIIT, MoC&I
·
Base year:2011-2012
·
Takes into account only goods at
whole sale price
·
Until 2015 the headline inflation.
(2)CRI[Consumer Price Index]
·
Released by CSO under MoS&PI
·
Takes into account both goods and
services at retail level
·
Base year:2012
·
Current headline inflation
·
Types : CPI-Rural, CPI-Urban,
CPI-Combined
(3)PPI[Producer Price Index]
·
PPIs in manufacturing measure the
rate of change in prices of products sold
·
They exclude any taxes, transport
and trade that the producers have to pay
·
PPIs provide measures of average
movement of prices received by the producers of various commodities
·
They are often seen as advanced
indicators of price changes throughout the economy.
·
Currently India haven’t started
measuring PPI yet
EFFECTS OF INFLATION ON VARIOUS FACTORS:
|
FACTOR |
EFFECT[POSITIVE/NEGATIVE] |
|
For Creditors |
Negative |
|
For Debtors |
Positive |
|
On Aggregate
demand |
Positive |
|
On investment |
Positive |
|
For fixed
income group |
Negative |
|
For flexible
income group |
Positive |
|
On savings |
Negative |
|
On indirect
taxes |
Negative |
|
On direct taxes |
Negative |
|
On employment
in short run |
Positive |
|
On employment
in long run |
Negative |
