Inflation

Inflation

The rate at which the general level of prices for goods and services rises, eroding purchasing power.

Consumer Price Index (CPI)

An index measuring the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

Wholesale Price Index (WPI)

An index that measures and tracks the changes in the price of goods in the wholesale market.

Demand-pull inflation

Inflation caused by an increase in demand for goods and services, leading to higher prices.

Cost-push inflation

Inflation that results from an increase in the cost of production, which leads businesses to raise prices.

Built-in inflation

Inflation that results from the adaptive expectations where wage increases lead to higher production costs and thus higher prices.

Consequences of high inflation

High inflation reduces purchasing power, diminishes savings, impacts investments negatively, and threatens overall economic stability.

Monetary policy tools

Tools used by the Reserve Bank of India (RBI) to manage inflation, including interest rate adjustments and liquidity management.

Phillips Curve

A concept showing the inverse relationship between the rate of inflation and the rate of unemployment in an economy.

Fiscal policy

Government policy regarding taxation and spending used to influence the economy and control inflation.

Supply-side policies

Strategies aimed at increasing economic productivity and efficiency, often through deregulation and encouraging investment.

Impact of inflation on low-income households

Inflation disproportionately affects poorer sections of society by reducing their purchasing power and increasing the cost of essential goods.