Inflation and its types
As a human, we need a set of goods and services like food grains, fuel, water, electricity, transportation, internet, and healthcare. Inflation doesn’t affect the prices of anyone or two goods and services if it affects them all. Because the prices of all the goods and services are interdependent For example if the fuel price increases transportation becomes costly and increases in basic goods. Inflation not only directly affects the pockets of every earning individual but also has a deep impact on the economy of the nation. The loss of value of a currency increases the prices of goods and services and affects the supply of goods and services.
Many economists believe that the cash flow or the money supply plays a crucial role in controlling inflation and in the economic growth of a nation. However, the cash flow is regulated by the central bank of the nation, thus the central bank adopts necessary measures to limit the cash flow in the market so that inflation can be controlled.
Read, Causes of Inflation
Types of Inflation
Inflation can be simply defined as a decline in the value of a currency. Inflation directly affects the prices of essential goods and services. Also, it helps in calculating the increase in the price of certain goods and services in the past years. Inflation can be experienced when it requires more money to buy the same amount of goods. For example, if a pack of biscuits weighing 50 grams costs Rs. 5/Nos. in the year 2021 and the same pack of biscuits costs Rs. 8 in the year 2022 then it can be said that there is inflation. When a unit of currency can buy less than usual then it can be said that the nation is going through inflation. Inflation is measured in percentages, and the current rate of annual inflation in April of 2022 in India is 7.79%. Deflation is a state in which the prices of goods and services begin to fall with an increase in the value of the currency.
Read, What is Inflation
Table of Content
- Inflation and its Impact
- Types of Inflation
- How is Inflation Measured?
- Advantages and Disadvantages of Inflation
- Steps Adopted by the GOI to Tackle Inflation in India