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Inflation BY AYUSSH SANGHI Important Terms relating to Inflation Part 4.15
Stagflation . It refers to a situation in an economy when inflation and th are at high levels. Such a situation occurs when the inflation may have gone on for a long period of time and resultantly affected the input prices as well as the demand for goods and services in the economy.
Stagflation Causes for stagflation in an econor . Causes for stagflation in an economy: . Firstly, stagflation can occur in an economy, when the productive capacity of an economy is reduced by an unfavourable supply shock, such as an increase in the price of oil for an oil importing country . Such an unfavourable supply shock tends to raise prices and slows the economy by making production more costly and less profitable. n more costly and less pir
Stagflation . Causes for stagflation in an economy: Secondly, stagflation can result due to macroeconomic policies which Example: Central banks can cause inflation by permitting excessive designed in a manner to regulate money supply/ labour market. growth of the money supply and the government can cause stagnation by excessive regulation of goods markets and labour market.
Deflation When some event leads to decrease in prices of goods and services, it is known as Deflation Atermaively,deflation is the complete opposite of infation as . Alternatively, deflation is the complete opposite of inflation as there is a fall in the general price levels in the economy over a period of time. Deflation occurs when the inflation rate falls below 0%
Be Careful Please DO NOT confuse Deflation with Disinflation
Dis-inflation . It can be defined as a slow-down in the inflation rate. Following the Asian financial crisis in late 1997, Hong Kong experienced a long period of deflation which did not end until the end of 2004.
Recession It is a situation which is characterized by negative growth rate of GDP into successive quarters. Some of the indicators of a recession include: slowdown in th fall in investments, . fall in the output of the economy. . slowdown in the economy,
Depression It is an extreme form of recession and characterises a situation in which the recession may have gone on for too long resulting in depression of the economy A common rule of thumb for recession is two quarters of negative GDP growth.
Depression Some of the indicators of a depression are huge fall in demand and consumption of goods and services, shattering of business investments. Example: Great Depression of 1930s. confidence, a sharp decline in the output of the economy and