Key Points
Key Points: Inflation
- Inflation = persistent + appreciable + general rise in prices — all three must be present.
- A 2–3% annual inflation is healthy; it becomes a problem only when excessive.
- Demand-Pull Inflation = too much demand; too little supply → prices rise.
- Cost-Push Inflation = rising costs (wages/oil/monopoly power) → producers raise prices.
- Three sub-types of cost-push: wage-push, profit-push, and supply shock (oil shock).
- The inflation rate measures the % increase in average prices year over year.
Important Questions [2]
Concepts [9]
- Inflation
- Wholesale Price Index (WPI)
- Consumer Price Index (CPI)
- Food Basket
- Relationship Between Value of Money and Price Level
- Types of Inflation
- Demand Pull Inflation
- Cost Push Inflation
- Effects of Inflation
