ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Inflation: It is a sustained rise in the general price level in an economy. Stagflation: A situation in which the inflation rate is high, the economic growth rate slows down, and unemployment remains steadily high. Deflation: It is a persistent fall in the general price level of goods and services.

Detailed explanation-2: -Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country.

Detailed explanation-3: -Sustained inflation is a period of continuous rising prices. The reason price rise are usually continuous is: Wage price spiral. If workers get rising wages, they spend more (demand-pull inflation) and increase costs for firms (Cost-push inflation). This causes inflation.

Detailed explanation-4: -Persistent Inflation Example: The Great Inflation The Great Inflation of the 1970s and early 80s is a prime example of persistent inflation, and in this case, the phenomenon lasted for years instead of months. The inflation rate, as measured by the CPI, stayed above 5 percent and peaked at 14 percent in 1980.

Detailed explanation-5: -In an inflationary environment, unevenly rising prices inevitably reduce the purchasing power of some consumers, and this erosion of real income is the single biggest cost of inflation. Inflation can also distort purchasing power over time for recipients and payers of fixed interest rates.