What is inflationary gap, inflationary spiral, deflation, disinflation, reflation, stagflation and slumpflation?
TERMINOLOGIES ASSOCIATED WITH INFLATION, DISINFLATION AND DEFLATION
Inflationary gap: Inflationary gap refers to an economic situation in which the total demand in the economy exceeds the total supply of goods and services available to satisfy demand. Inflationary gap is calculated as the difference between the total amount of money available for spending and the total money value of the goods and services available to meet the demand.
The greater the inflationary gap, the greater the rate of inflation in the economy and vice versa.
Inflationary spiral: Inflationary spiral is caused by an interaction of income factors, especially wages and prices, such that an increase in the price level causes workers to demand higher wages which cause the price level to still rise higher, thereby increasing the cost of production.
When prices rise, workers demands for higher wages, and so the wages increase. But this increases the cost of production, while prices increases again and the condition continues in this spiral manner.
Disinflation: Disinflation refers to a set of measures by which the inflationary pressure in an economy is removed so as to maintain the value of money. The essence of disinflation is to control inflation by direct control of consumer expenditure. This is done by reducing the supply of money and increasing interest rates, etc.
Reflation: Reflation refers to an economic state of affairs in which prices, employment, output, etc are picking up a gain as a result of conscious government policy t: that affect. When deflation has had too drastic effect on the economy, reflation is a period of recovery from the slump. While reflation is directed against deflation, disinflation is directed against inflation
- economic tools for nation building
- factors affecting the expansion of industries
- mineral resources and the mining industries
- demand and supply
- types of demand curve and used
- advertising industry
- factors of production
- joint stock company
- public enterprises
- private enterprises
- limited liability companies
Stagflation: Stagflation refers to high rate on inflation which exists at the same time as industrial production is slowing down. It refers to high increases in the price level which are not accompanied by any increase in industrial production.
Slumpflation: Slumpflation refers to an economic condition in which much reduce economic activity co-exists with inflation. In other words, slumpflation is marked by the idleness and under-utilization of resources sue I as capital and labour, at the same time as general price level is rising and the value money falling.Related Posts