Madam,First of alI I would like to thanks you for such an amazing lectures. I am learning a lot from these lectures. I have having confusion in following line. Could you please elaborate. Higher the inflation, lower the loan rate. ??

Maneesh

5 months ago

Rising inflation indicate higher purchasing capacity???????

aily Lecture Series Ramesh Singh's) A brief Summary of Indian Economv Inflation and Business Cycle-D indi unacadeny By Aartee Mishra
lam Aartee Mishra Graduated from Delhi University, Topper in all my semesters, Pursuing P.G and preparing for CSE. 2 Years of teaching experience of General Studies for competitive examination Have been teaching on Unacademy Plus
Comprehensive course of Art and Culture with Brief Indian History Comprehensively cover entire Art and Culture with Brief History Aartee Mishra of India Elaborately explain topics 24 detailed lessons covering all the essential topics related to History UPSC Civil Services Prelims and Mains Examination otho Art and Culture with Brief History from NCERT books Medieval History, Art & Culture from Tamil Nadu History book Course Starting from 18h June, ruam-12pm on At the end of the program adept and able to solve the exam Unacademy Plus based test papers
EFFECTS OF INFLATION There are multi-dimensional effects of inflation on an economy both at the micro and macro levels. It redistributes income, distorts relative prices, destabilises employment, tax, saving and investment policies, and finally it may bring in recession and depression in an economy. A brief and objective overview of the effects of inflation is given below: On Creditors and Debtors Inflation redistributes wealth from creditors to debtors, i.e., lenders suffer and borrowers benefit out of inflation. The opposite effect takes place when inflation falls (i.e., deflation) > On lending With the rise in inflation, lending institutions feel the pressure of higher lending. Institutions don't revise the nominal rate of interest as the 'real cost of borrowing, (i.e., nominal rate of interest minus inflation) falls by the same percentage with which inflation rises.
EFFECTS OF INFLATION On Aggregate Demand Rising inflation indicates rising aggregate demand and indicates comparatively lower supply and higher purchasing capacity among the consumers. Usually, higher inflation suggests the producers to increase their production level as it is generally considered as an indication of higher demand in the economy On Investment Investment in the economy is boosted by the inflation (in the short-run) because of two reasons: (i) Higher inflation indicates higher demand and suggests enterpreneurs to expand their production level (ii) Higher the inflation, lower the cost of loan
EFFECTS OF INFLATION On Saving Holding money does not remain an intelligent economic decision (because money loses value with every increase in inflation) that is why people visit banks more frequently and try to hold least money with themselves and put maximum with the banks in their saving accounts. This is also known as the shoe leather cost38 of inflation (as it consumes the precious time of the people visiting the bank frequently tagging their shoe). On Expenditure Inflation affects both the forms of expenditures consumption as well as investment. Increased prices make our consumption levels fall as goods and services we buy get costlier. We see a tendency among the people to cut their consumption levels aimed at neutralisin fall. Exact opposite happens once prices head downward g the impact of price rise- making consumption expenditure
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