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Inflation | Kerala PSC LDC
- Fact 1 of 8📈
What inflation really means
Inflation is a sustained rise in the general price level of goods and services, which reduces the purchasing power of money. A single price rising does not count; the overall level must keep climbing.
- Fact 2 of 8🛒
Who measures India's prices
India's Consumer Price Index (CPI) is compiled by the Ministry of Statistics and Programme Implementation (MoSPI), while the Wholesale Price Index (WPI) is compiled by the Office of the Economic Adviser under the Department for Promotion of Industry and Internal Trade.
- Fact 3 of 8🎯
RBI's inflation target
The Reserve Bank of India follows flexible inflation targeting, with a target of 4% CPI inflation and a tolerance band of 2% on either side. This framework is set jointly by the government and the RBI.
- Fact 4 of 8🏭
Demand-pull vs cost-push
Demand-pull inflation occurs when total demand outstrips supply, while cost-push inflation arises when rising production costs, such as wages or raw materials, push prices up. Exam questions often ask students to tell these two apart.
- Fact 5 of 8📉
The Phillips curve trade-off
A.W. Phillips (1958) observed an inverse relationship between inflation and unemployment. This idea shaped macroeconomic policy debates for decades, though it weakened during the 1970s.
- Fact 6 of 8🥶
When inflation and stagnation meet
Stagflation combines stagnant economic growth, high unemployment and high inflation at the same time. It was widely seen in many Western economies in the 1970s and challenged the Phillips curve view.
- Fact 7 of 8🔻
Disinflation is not deflation
Disinflation means inflation is slowing down, so prices still rise but more slowly. Deflation is a fall in the general price level, which is a very different situation.
- Fact 8 of 8💸
Germany's famous hyperinflation
Hyperinflation is extremely rapid, runaway price increases. Germany experienced one in 1923, when prices rose so fast that money lost most of its value within months.
