Recap Daily Points – April, 2025

 

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Recap Daily Points  – April, 2025

2025. Depression

Depression is a prolonged period of economic recession marked by a significant decline in income and employment. A common rule of thumb for depression is a negative GDP of 10% of more, for more than 3 years.

 

2026. Slowdown

Slowdown means that the pace of the GDP growth has decreased. During slowdown, the GDP growth is still positive but the rate of growth has decreased.

 

2027. Inflation

In a market economy, prices for goods and services can always change. Some prices rise; some prices fall. Inflation occurs when there is a broad increase in the prices of goods and services, not just of individual items; it means, you can buy less for Re 1 today than you could yesterday. Inflation is a sustained increase in the general level of prices for goods and services. In other words, inflation reduces the value of the currency over time.

 

2028. Demand-pull inflation

Demand pull inflation is caused by increased demand in the economy, without adequate increase in supply of output. It is mainly an outcome of excess money income with the people. This high money income would be due to increased money supply. The situation of “too much money chasing too few goods” is an instance of demand pull inflation. 

 

2029. Cost -Push inflation

Cost push inflation represent inflation due to price rise of inputs in the form of increased raw material cost, electricity charges or wage rate (including a rise in profit margin made by the producer). Such a price rise results in increased cost and price of the product leading to cost push inflation. Price rise of key inputs like crude oil products may trigger price spiralling effect on other goods and services. In India, cost push inflation is the major supply side factor producing inflation.

 

2030. Open Inflation

This is the simplest form of inflation where the price level rises continuously and is visible to people. You can see the annual rate of increase in the price level.

 

2031. Repressed Inflation

Let’s say that there is excess demand in an economy. Typically, this leads to an increase in price. However, the Government can take some repressive measures like price control, rationing, etc. to prevent the excess demand from increasing the prices.

 

2032. True Inflation

This takes place after the full employment of all the factor inputs of an economy. When there is full employment, the national output becomes perfectly inelastic. Therefore, more money simply implies higher prices and not more output.

 

2033. Semi-Inflation

Even before full employment, an economy might face inflationary pressure due to bottlenecks from certain sectors of the economy. Such inflation is called Semi-Inflation. 

 

2034. Creeping Inflation

Creeping inflation also known as mild inflation is as the name suggests a very slow rise in prices of goods and services. If the prices increase by 3% or less annually, then such inflation is creeping inflation. Such inflation is not harmful to the economy. This is also known as mild inflation.

 

2035. Walking inflation

Walking inflation occurs when prices rise moderately and annual inflation rate is a single digit. This occurs when the rate of rise in prices is in the intermediate range of 3 to less than 10 per cent.

 

2036. Moderate Inflation

Moderate inflation occurs when the price level persistently rises over a period of time at a mild rate. When the rate of inflation is less than 10 per cent annually, or it is a single digit inflation rate, it is considered to be a moderate inflation.

 

2037. Running inflation

When prices rise rapidly at the rate of 10 to 20 per cent per annum, it is called running inflation. This type of inflation has tremendous adverse effects on the poor and middle class. Its control requires strong monetary and fiscal measures.

 

2038. Galloping Inflation

If mild inflation is not checked and if it is uncontrollable, it may assume the character of galloping inflation. Galloping inflation (also jumping inflation) is one that develops at a rapid pace (dual or triple-digit annual rates), perhaps only for a brief period of time. Such form of inflation is dangerous for the economy as it mostly affects the middle and low-income classes of population. Importantly, the galloping inflation can precipitate an economic depression. Nevertheless, the galloping inflation can still be accompanied by the real economic growth.

2039. Hyperinflation (Runaway Inflation)

It is a stage of very high rate of inflation. While economies seem to survive under galloping inflation, a third and deadly strain takes hold when the cancer of hyperinflation strikes. Hyperinflation occurs when the prices go out of control and the monetary authorities are unable to impose any check on it. It is also known as Runaway inflation.

 

2040. Built-in inflation

Expectation of future inflations results in Built-in Inflation. A rise in prices results in higher wages to afford the increased cost of living. Therefore, high wages result in increased cost of production, which in turn has an impact on product pricing. The circle hence continues.

 

2041. Skewflation

Skewflation means the skewness of inflation among different sectors of the economy — some sectors are facing huge inflation, some none and some deflation.

 

2042. Structural inflation

Structural inflation is the one prevailing in most developing countries. The situation is due to the operation of the structural weakness (supply bottleneck, lack of infrastructure, etc.) existing in a developing economy. Lack of adequate supply responses or production to increase in demand is the cause of structural inflation. 

 

2043. Imported inflation

Increase in the prices of imported goods like crude, coal etc., can produce domestic inflation. This is called imported inflation.

 

2044. Price spiralling effect of inflation

Inflation has a tendency to pass on from one sector to the other depending upon the prevailing conditions. In developing countries like India, inflation often begins in primary commodities like food and fuel. Price rise may be appearing in one sector or in the case of a few commodities. But it always has the tendency to spread all over the economy-into different goods and services. Price rise in basic goods spreading to other commodities is called price spiralling effect.

 

2045. Protein Inflation

Protein inflation is the increased prices of protein rich items like mil, meat, fish, egg etc.

 

2046. Food Inflation

Food inflation is the inflation visible in food items. There are two food inflation measurements out the CPI -the Consumer Food Price Index and the WPI – Food Price Index that measures food inflation in India.

 

2047. Core inflation or Underlying inflation

Core inflation which is also called underlying inflation, excludes seasonal inflationary factors such as food and energy costs. The transitory or seasonal inflation is removed from headline inflation to get core inflation.

Core and non-core are the two parts of total inflation or what we call the headline inflation.

So, Headline inflation = Core inflation + Non-core inflation

Or

Core inflation = headline inflation – non-core or seasonal inflation.

 

 

2048. Seasonal inflation or non-core inflation

Seasonal inflation is the temporary price rise that usually occurs in primary products like food and fuel items.

 

2049. Reflation

Reflation is stimulating the economy by producing inflation. It is done by increasing money supply or by reducing taxes. The reflationary exercise is often made by the government and the central bank is done to bring back the economy from recession. In effect, reflation is the opposite of disinflation.

 

2050. Disinflation

Disinflation is the slowing rate of inflation. Disinflation condition indicates that the inflation rate is coming down marginally over a short term. Disinflation is different from deflation. Deflation is decline in prices, whereas disinflation is decline in inflation rate.

 

2051. Stagnation

Stagnation is a prolonged period of little or no growth in an economy. Real economic growth of less than 2% annually is considered stagnation, and it is highlighted by periods of high unemployment and involuntary part-time employment. Stagnation can occur on a macroeconomic scale or a smaller scale in specific industries or companies. Stagnation can occur as a temporary condition, such as a growth recession or temporary economic shock, or as part of a long-term structural condition of the economy.

 

2052. Ratchet effect

Ratchet effect is a price/age situation where prices or wages goes upwards only and can’t be reversed or reduced. 

 

2053. Deflation

Deflation is the opposite condition of inflation. It is general decline in prices, often caused by a reduction in the supply of money or credit. Deflation can be caused also by a decrease in expenditure by government, consumers or business people. Deflation produces many side effects. The major one is that it is a disincentive for the producers. Because of the declined demand and lower investment, unemployment occurs in the economy. Gradually, deflation can worsen into a recession and depression. It is often said that among the two undesirables- inflation and deflation; deflation is more dangerous. Hence, Central banks try to avoid severe deflation. Deflation is also known as Negative Inflation.

 

2054. Philip’s curve

Philip’s curve shows a trade-off between inflation and unemployment. Unemployment can be reduced by affording to inflation. The concept has been developed out of a study made by British Economist William Philips on the British economy. The Phillips curve brings an inverse relationship between the rate of unemployment and the rate of inflation in an economy. It can serve as a menu between two evils -inflation and unemployment; for the policy makers. Stated simply, the lower the unemployment in an economy, the higher will be the rate of inflation.

 

TBT Team

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