CBSE Class 11 Economics Inflation Problems and Policies Assignment Set A. Chapter wise assignments are being given by teachers to students to make them understand the chapter concepts. Its extremely critical for all CBSE students to practice all assignments which will help them in gaining better marks in examinations. All assignments available for free download on the website are developed by the best teachers having many years of teaching experience in CBSE schools all over the country. Students, teachers and parents are advised to download the CBSE study material.
Inflation: It is a situation of persistent & considerable rise in prices, leading to a fall in purchasing power of money.
Deflation: It occurs when prices are declining over time. It is a situation when the supply of goods rises faster than the supply of money.
Stagflation: It is a condition of slow economic growth & relatively high unemployment, accompanied by a rise in prices.
Types of Inflation:
• Demand Pull Inflation: It arises when there is an excess of demand for goods over their supply. When there is a persistent increase in demand & supply does not increase proportionately, then price tends to rise.
Causes for Demand Pull Inflation:
¶ Increase in Public Expenditure: When people have confidence in the economy, they start spending more & save less. Also they resort for lending to fulfill various demands like home loans etc. This leads to an increase in the overall demand in the economy.
¶ Increase in Govt. Spending: As the government spends more in any particular segment of the economy, it drives up demand. For example, military spending raises prices for military equipment.
¶ Increase in Money Supply: A fall in interest rates may stimulate too much demand – for example in raising demand for loans or in causing rise in house price inflation.
¶ Improved business confidence: It prompts firms to raise prices and achieve better profit margins
¶ Increase in Population: With increasing population, the demand for basic goods & services increase at a much faster pace than the increase in the supply. This leads to demand pull inflation.
¶ Cost Push Inflation: It occurs when rise in price is due to rise in the cost of production. In this type of inflation, supply factors play an important role. Once, this type of inflation sets in one industry, it spreads to all other industries of an economy.
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