← Economy Short Tricks⚡ SHORT TRICK

Inflation - Short Trick

Effects, deflation to core, WPI and CPI, and control — one sentence each

1 trick sentences1 pairs4 parts
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How to read
  • Guru Ram Each coloured word = one name in the list, shown below in the same colour
  • Panda Two colours in one word = two names
  • ➜ Order the numbered order matters · ⇄ Any order no order
1

Types and Effects

Two examples of hyperinflation, and who wins and who loses in inflation.

Pairs

Hyperinflation — where it was seen

1 sentences

A hyper German kid bowled all day.

Hyper inflation=Germany after the First World War · Bolivia in the middle of 1985 · annual rates may run into millions

Creeping — slow, single digit · galloping — double or triple digits, also called hopping or running inflation · bottleneck — supply falls drastically while demand stays the same.

Trick 1

Who gains and who loses in inflation

⇄ Any order

GainBunty’s father eats dosa.

LoseSam’s boss coughed.

  1. Business communitystock is worth more, prices run ahead of costs
  2. Farmersbetter prices for the harvest
  3. Equity investorshigher company profits mean more dividend
  4. Debtorsthe money they repay is worth less
  5. Salaried people on a fixed incomepay rises later and smaller than prices
  6. Bond and debenture investorsfixed interest loses value
  7. Creditors

On the whole economy — gross domestic savings fall, capital formation shrinks and the long-term growth rate falls.

3

Measuring It — WPI, CPI and the GDP Deflator

Each index’s publisher and base year, and the widest measure of all.

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4

Measures of Control

Three roads to controlling inflation, and whose hands each one is in.

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Read the full chapter for the complete notes — a trick helps you remember the list; understanding comes from the notes.