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Inflation and Growth

In: Business and Management

Submitted By sudiptosur
Words 959
Pages 4
An Analysis :
Inflation and Growth

Submitted By:
Omkar Athalekar
Parag Sapkal
Sudipto Sur
Tushar Nayanam

What is Inflation?
Inflation can be defined as a sustained increase in the general level of prices for goods and services. It is measured as an annual percentage increase. As inflation rises, every unit of currency one owns buys a smaller percentage of goods and services.
How is inflation measured?
Measuring inflation is a difficult problem even for government statisticians. To do this, a number of goods that are representative of the economy are put together in what is referred to as a “Market Basket”. The Cost of this basket is then compared over time. This results in a price index, which is the cost of the market basket today as a percentage of the cost of that identical basket in the base year.
The index number is a single figure that shows how the whole set of related variables has changed over time or from one place to another. In particular, a price index reflects the overall change in a set of prices paid by a consumer or a producer. Different countries use different indices, some of the common ones are :
Consumer Price Index : The CPI measures price change from the perspective of the retail buyer. It is designed to measure changes in the level of retail prices of selected goods and services on which consumers of a defined group spend their income.
Wholesale Price Index : WPI represents the price of goods at a wholesale stage i.e. goods that are sold in bulk and traded between organizations instead of consumers. WPI is used as a measure of inflation in some economies.
Producer Price Index : PPI is a family of indices which measure the average change over time in selling prices by domestic producers of goods and services. PPIs measure price change from the perspective of the seller.

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