3/22/2018 SSC GK Economy Notes: Inflation and its types

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SSC GK Economy Notes : In ation and its types

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We have discussed SSC CHSL GK Notes for Economics section. These Economic
Notes based on In ation and its types will be bene cial for upcoming SSC CHSL
Tier I and SSC CGL 2018 Exam.

SSC GK Notes based on In ation and its types

In ation

The general rise in the price level of goods and services.

It is estimated as the percentage rate of change in price index over the
reference time-period.
Currently in India in ation rate is measured with the help of Consumer Price
Index- combined (Base year- 2012).
Till April 2014, In ation rate was measured with the help of WPI (Wholesale
Price Index).
Rate of In ation= (Current period price index-Reference period price
index)/(Reference Period Price Index)×100

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3/22/2018 SSC GK Economy Notes: Inflation and its types

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Type of In ation
Based on rate of rising in In ation
1. Creeping In ation

Price rise at very small rate (< 3 %)

It is considered safe and essential for the economy.

2. Walking or Trotting In ation

Price rise at moderate rate (3 % < In ation < 10 %)

In ation at this rate is a warning signal for the Economy.

3. Running In ation

Price rise at high rate (10 % < In ation < 20 %)

It affects economy adversely.

4. Hyperin ation or Galloping In ation or Runway In ation

Price rise at very high rate (20 % < In ation < 100 %)
This situation brings total collapse of Economy.

Based on causes

Demand Pull In ation: When In ation arises due to higher demand for goods
and services over the limited supply.
Cost Push In ation:  When In ation arises due to higher input cost (Example-
raw material, wages etc.) for goods and services over the limited supply.

Other de nitions-
1. De ation

It is opposite to In ation.
Reduction of general level of price in an economy.
In this price index measured is negative.

2. Stag ation: When stagnation and in ation coexist in the economy.

3. Stagnation: low national income growth and high unemployment.
4. Disin ation
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3/22/2018 SSC GK Economy Notes: Inflation and its types

When the rate of In ation is at a slower rate.

Example:
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If the In ation of last month was 4 % and rate of in ation in the current month
is 3 %.

5. Re ation: 

Deliberate action of government to increase the rate of in ation to redeem

economy from a de ationary situation.

6. Core In ation: 

It is a measure of price rise in the economy excluding the price rise of some
products (whose price is volatile and temporary in nature.

Effects of In ation
1. Redistribution of income and wealth

Due to the effect of in ation, some group of people loses and another group
of people gains.
Example-
In case of debtors and creditors
Debtor- gainer
Creditor- loser
In case of Producers and Consumers
Producer- gainer
Consumer- loser

2. Effects on Production and Consumption

Due to in ation, the demand decreases which curtails the production.

People try to use fewer services which lead to decrease in consumption.

3. Unfavorable Balance of Payments

Export decreases and import increases from other countries which lead to
decrease in forex reserve.

Measures to control In ation

1. Credit control-

It is used by RBI.

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3/22/2018 SSC GK Economy Notes: Inflation and its types

2. Increase in Direct Taxes

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Due to increase in direct taxes, people have less money available to them and
low demand from them leads to a lower price.

3. Price Control

By xing maximum price limit by authorities.

4. Trade measures

Maintain proper supply in the economy by export and import of goods and
services.

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Tags : SSC SSC CGL General Awareness

Posted by:

Puneet Bansal
Feb 23 SSC

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