Inflation-calculations,controls,effects.pptx

inflation

1. INFLATION Name- Kasliwala Darshit Name- Makwana Ankit Reg No. 3010122058 Reg No. 3010122068 Roll No. 50 Roll No. 59 Course Code- Ag. Extn. 4.2 Course Title: Rural Sociology and Educational Psychology (2+0) Submitted to: Dr. Kalpesh Chaudhary Assistant Professor Department of Agricultural Extension and Communication NMCA, NAU, Navsari

2. Content What is inflation? How is inflation calculated? How RBI controls inflation? How it effects us?

3. What is Inflation? Inflation is decline In the purchasing power of a given currency as the cost of living goes up.

4. How is inflation calculated? It is calculated with consumer price index. CPI includes 299 commodities and services.

5. How RBI controls Inflation? RBI controls inflation by changing REPO rate. REPO rate is “Repurchase rate” RBI lends money to commercial banks and charges interest from these banks. These commercial banks gives loans to us. When RBI increases REPO rate these commercial banks also increases their interest rate of loans This increase in interest will decrease the purchase power of an individual. So the demand of any goods and service will decrease and their price will not increase.

6. How it effects us? We will see it with an example If HDFC gets money from RBI at 6.15% then HDFC will give loan to Darshit at 8.15% that 2% difference is profit of HDFC. Now RBI increases REPO rate to 6.25% then HDFC will also increase interest rate to 8.25% to cover their profit. Now when interest rate is increased then Darshit will have to pay more interest and his purchase power will decrease and he will spent less money on movies, restaurants, cloths etc. Now if thousands of people will reduce their cost of living demand for every commodity will decrease and increase in price rate of product will also stop.

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