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Important Terms Relating To Inflation Part 1
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This lesson is the penultimate lesson under this course of Inflation. Here, Ayussh Sanghi will explain important terms pertaining to Inflation. One will understand and will be able to learn terms such as stagflation, deflation, dis- inflation, recession, ​and depression.

Ayussh Sanghi is teaching live on Unacademy Plus

Ayussh Sanghi
Passionate Educator - CSE / Other Govt Exams [Peep into my Unacademy Plus Courses & experience awesome learning.]

U
Unacademy user
P
sir i definitely contribute in ur videos ....after my selection that s my promise
Bk
if deflation results in low prices....means purchasing power will increase resulting into more demand and again inflation....this looks like a never ending chain
Hello Sir... While you were explaining the difference between Deflation and Disinflation you said the price of a good becoming Rs.20 from Rs.10 which is a 100% inflation following which it reduces to Rs.15 which is termed Disinflation. I think disinflation is a reduction in the percentage change in the price(i.e., rate of inflation) but not a reduction in the price itself(which is deflation) which means the price of a good changing from Rs 10 to Rs 20 implying a 100% inflation following which lets say the price become Rs.30 from Rs.20 implying a 50% inflation. Kindly clarify this.
RAHUL SRIVASTAVA
3 years ago
you are right. his explanation is wrong. if price increases from Rs. 10 to 20 it is 100% inflation, then if it reduces to Rs. 15 it is 25% deflation. if the price had become say Rs. 30 it would have been 50% inflation, hence disinflation since 50% is less than 100% increase.
Yogi Anath
3 years ago
Here both disinflation and deflation depends on the base price. In this case base price is 10 so suppose if price increases to 20 over a period than it is 100 % inflation . after some time if price decreases from 20 to 15 base price being 10 then it is slow inflation or DISINFLATION by 50 % and still if price reduces further even below the base price say to Rs 8 then it is negative inflation OR DEFLATION by 20%. @Rahul so what Aayush has explained is completely correct . you got it wrong buddy.
Chaitanya Garg
2 years ago
yogi ji is right
Lovenish Agarwal
2 years ago
I think Pawan is right...You can not always compare the prices with a fixed prices (10 here)..while calculating any index of inflation for next month/year you have to compare it with the prices of last month/year..So if price will decrease to 15 from 20 over a period of time that will definitely be deflation and not disinflation...
Yogi Anath
2 years ago
bro inflation is always calculated with a base year, present being 2011-12 for both CPI and WPI. bdw Deflation is negative rate of inflation while disinflation is slow rate of inflation now you do the math.thanks
Lovenish Agarwal
2 years ago
So if base price is 100 ( in 2011-12) and price increases to 105 next year, then there will definitely be 5% inflation on year to year basis... but if prices are constant at 105 for next 5 years then also according to you there is an inflation of 5%..this can not be True
Lovenish Agarwal
2 years ago
So if base price is 100 ( in 2011-12) and price increases to 105 next year, then there will definitely be 5% inflation on year to year basis... but if prices are constant at 105 for next 5 years then also according to you there is an inflation of 5%..this can not be True
Yogi Anath
2 years ago
yes then we say that inflation has remained constant at around 5% for 5 years. we don't calculate inflation on YOY basis rather we fix a base year which is usually a pretty normal year of the economy. Say for eg: 2016 cannot be set ever as a base year coz of demonetisation. I hope you got it. thanks
Is deflation good for the economy?
Thank you Sir........................ Thanks to unacademy.................................
i cant understand the stagflation becoz he told that demand is higher than supply means people are demanding more means they have lot money with them but unemployment ???..
Akash Jain
2 years ago
unemployement occurs when there is increase in prices of goods drastically due to supply shock, this causes slowdown of economy. slowdown reduces the employing capacity which leads to unemployment
  1. Inflation BY AYUSSH SANGHI Important Terms relating to Inflation Part 4.15


  2. 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.


  3. 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


  4. 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.


  5. 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%


  6. Be Careful Please DO NOT confuse Deflation with Disinflation


  7. 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.


  8. 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,


  9. 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.


  10. 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