Page 102 - DMGT401Business Environment

Unit 3: Economic Environment of Business

There are two major ways practiced to control inflation: monetary control and price Notes
controls.

3.7 Keywords

Administered Pricing: Inflation caused by the revision of prices by the government
Consumer Price Index: Measures price of a selected goods purchased by a consumer
Cost Pull Inflation: Caused by large increases in the cost of important goods
Deflation: A fall in prices, the opposite of inflation.
Demand Pull Inflation: Arises when aggregate demand outpaces aggregate supply

Disinflation: The slowing of the rate of inflation
GDP Deflator: Index of the average price for goods and services produced in the economy
Hyperinflation: Extremely high rate of inflation

Indirect Tax: Direct liability to pay the tax lies not with the pay
Inflation: Continuous rise in prices, accompanied by a decrease in the purchasing power
Inflation Rate: Rate of increase of the average price level
National Income: Measure of the total value of the goods and services produced in a year by an
economy
Reflation: Inflation after a period of deflation
Shoe Leather Costs: Cost of holding of currency and the opportunity cost
Seigniorage: Revenue raised through the printing of money

Whole Price Index: Measures the change in price of a selection of goods at wholesale

3.8 Self Assessment

State whether the following statements are true or false:
1. Countries like North Korea took a capitalist path for development.

2. India ranks very low on per capita income but relatively higher on human development
index.
3. India faces a regular mismatch between its exports and imports thereby creating a negative
BOP.
4. National income also includes the income earned by non-resident Indians.
5. National income can also used by the governments to prepare Human Development
Index.
6. Measures of inflation differ on the basis of basket of goods chosen.
7. Hyperinflation is just an imaginary phenomenon; it does not happen for real.

8. Inflation takes a toll on real incomes of the employees working in organisations.
Fill in the blanks:
9. India shows the traits of being a ………………. economy.

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