4 Inflation is a global Phenomenon which is associated with high price causes decline in the value for money. It exists when the amount of money in the country is in excess of the physical volume of goods and services. Explain the reasons for this monetary phenomenon. ( Define Inflation, Causes for Inflation )
Answer:- Define Inflation
Inflation is statistically measured in terms of percentage increase in the price index, as a rate (percent) per unit of time- usually a year or a month. The trend of price indices reveals the course of inflation in the economy. Usually, the Wholesale Price Index (WPI) numbers are used to measure inflation. Alternatively, the Consumer Price Index (CPI) or the cost of living index can be adopted to measure the rate of inflation. In order to measure the percentage rate of inflation, the following formula can be used:
Percentage rate of inflation, P[t] = Change in Pr ice[t] / Pr ice [t 1] x 100
Change in price [t] = P [t] – P [t-1]. Here, P = price level [t], [t-1] = periods of calendar time in which the observations are made.
