Essay on Inflation: Meaning, Measurement and Causes.
This nervousness is not because the idea of fighting deflation by promising inflation is crazy: it is in fact a straightforward conclusion from quite standard models. Indeed, once one admits that deflationary pressures come from the persistence of a savings-investment gap even at a zero interest rate, it is hard to see how this conclusion can be avoided.
Inflation: Meaning, Causes and Effects Effects of Inflation! Inflation is a highly controversial term which has undergone modification since it was first defined by the neo-classical economists. They meant by it a galloping rise in prices as a result of the excessive increase in the quantity of money.
The Phillips curve depicts the relationship between inflation and unemployment rates. The long-run Phillips curve is a vertical line that illustrates that there is no permanent trade-off between inflation and unemployment in the long run. However, the short-run Phillips curve is roughly L-shaped to reflect the initial inverse relationship.
The U.S. government's plan to introduce an improved Consumer Price Index that theoretically would measure inflation more accurately is an exercise in futility. Inflation is not about a general increase in prices; it is about increases in the money supply. Hence, whatever the improved index would measure has nothing to do with true inflation.
A new official inflation measure may be launched 'within two years', it has emerged, providing a potential boost for pensions and wages.
Fiscal and Monetary Policies and IS-LM Curve Model!. An alternative measure of expansionary fiscal policy that may be adopted is the reduction in taxes which through increase in disposable income of the people raises consumption demand of the people.. To reduce money supply for fighting inflation the Central Bank can also raise cash.
In sync with the rest of the world, India announced a slew of relief measures worth Rs 1.70 lakh crore last week, mainly focussed on its poor, to fight the Covid-19 pandemic.