World wars always had deeply affected the Indian Economy be it was WW1 or WW2. The reason people don’t talk much about the India and its economy in First World War is that many assume that India was not attached with it, which is quite the contrary. WW2 had much serious implications because it had curtailed India’s trade policies within the commonwealth of Britain and ended India’s touch with European nations.

The First World War caused India to nearly go bankrupt and also a major loss in casualties. Indian troops as high as 800,000 in numbers fought in every aspect of War and a majority 500,000 Indian people volunteered to fight for the British. Offers of financial and military help were made from all over the country. Hugely wealthy princes offered great sums of money for aiding the British in the war. But soon after the war Great Depression occurred in the European nations which soon had its implication in India.
The Great Depression that occurred in 1929 had a detrimental effect on India which was then ruled by British. To save them from the depression Government of British India ordered for a protective trade policy, which was just in the interest of England but made India suffer by deteriorating its Economy. The sea based trade was drastically reduced while the agricultural sector crippled. The ambiguous policies that were adopted by the British Governance in India and the international recession lead to very high inflation as the prices sky-rocketed for various goods and services. The high prices which would then be subjected to very high taxes laid by the government made Indians suffer heavily. The Great Depression took a huge toll on the farmers as they had to sell their possessions like gold and silver at petty rates just to survive.

In the Second World War had also caused a catastrophic loss to the Indian economy, between the years of 1939-45 external factors influenced the economy majorly which led to huge economic imbalances that prevailed long after peace was attained in India. The root cause of the entire Indian economic problem was Inflation which manifested due to tremendous amount of treasury which was used to finance various military activities. There were four major consequences of Second World War on India and they included high inflation which was on account of war expenditure, the value of Indian currency took a nose dive, economic imbalances due to currencies exchange problems and the development of exchange control.

The biggest cause of Inflation in India could be explained through the Sterling Balance problem that exhibited in India. The British Government used their currency to its advantage, for financing the war the British just transferred sterling bonds to the Government of India’s account which was there in the Bank of England. An agreement was made that upon the end of war the British Government would pay India those bonds in instalments so that it would not affect their economy, also it was agreed that the Sterling balance would be locked and fixed during the term of war. On the basis of blocked currency in England some more paper money was granted to India by the Government of British India, also during trade with various countries India purchased even more Sterling which further increased their Sterling reserves. As much as 1600 crores was held as Sterling securities with the RBI, owing to which even more paper currency was flushed into the market which finally led to uncontrolled Inflation.

The conditions were further exacerbated when Indians found out that the British had ulterior motives and they were reluctant to unlock the Sterling Securities. Not only this the various amount of resources that were looted and taken back to England during Independence was enough to make India already suffer but also they induced internal tension in India by the elms of partition that led to an internal civil war. One can say that though First World War had huge implications on India but the Second World War affected the nation in such a manner that its effects were prolonged and were seen few decades after the Second World War was dealt with.

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The Organization of the Petroleum Exporting Countries (OPEC) in an international organization which has its headquarters positioned in Vienna, Austria. OPEC’s mandate is to “coordinate and unify the petroleum policies” of its members and to “ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry.” The history of OPEC is an interesting one and one that calls for attention to be known about.

It was during 1960s, the era of the extensive decolonization when the international oil markets were tightly controlled by the private multinational companies also known as the “Seven Sisters “when five oil producing countries namely Iran, Iraq, Kuwait, Saudi Arabia and Venezuela met at Baghdad in the September of year 1960 and adopted a collective vision. Its first headquarters was in Geneva and was later shifted to Vienna, which is still it’s headquarters. They adopted ‘Declaratory Statement of Petroleum Policy in Member Countries and so they aimed in exercising full control over their nation’s natural resources in the name of national development. The number of member nations increased to 10 till the end of 1960s.

OPEC gained worldwide attention in the 1970s as their constituent nations were able to control their individual petroleum industries and hence became the key players in deciding the crude oil prices around the world. During the 70s decade on two occasion did the oil prices rose steeply the first was when the Arab nations stopped the oil exports to the Iranian allies and thus ordering a trade embargo to countries like USA which led to very oil crisis in the world and the second was when the Iranian revolution which led to Ayatollah Khomeini come to power by replacing Mohammad Reza Shah Pahlavi, in 1979. During this period only OPEC announced a key decision to form OPEC Fund for International Development, which aimed for socio-economic development schemes in the poorest nation of the world. The number of member nations increased to 13 by 1975.

During the 1980s the price levels of crude oil that had sky-rocketed, started falling steeply till they finally crashed in 1986. During the great crash, the member nations of OPEC suffered heavily as their petroleum revenue dropped below to one third of their peak. Finally in the late 1970s the prices stabilized and started rising and it was all due to OPECs new schemes which fixed a certain ceiling among Member countries and a Basket Reference for pricing was undertook. Amidst the quest for stabilizing the market prices, environmental issues were raised as a cause of concern in the international dialogue.

During the 1990s there was huge volatility in the prices of oil there was overall weakness in the general price of crude oil and owing to economic slowdown in the South-East Asian nations which drove the price of crude oil back to the levels as it was in 1986 levels. However the prices reached a solid recovery adjusting to the post-Soviet periods. After the Earth Summit of 1992, the climate change advocates protested against the OPEC to which OPEC demanded fairness. During this time one member nation departed OPEC whilst the other nations suspended their memberships.

During the 2000s OPEC initially functioned very well using the unique oil price band mechanism that helped them control the crude prices effectively. The biggest reason for destabilizing the oil prices became, Speculation, as the Oil was used seen as an asset. The oil prices took a record high and reached a ground breaking levels in mid-2008, after that they again fell sharply as the global recession took place. During the 2000s one country departed from OPEC, while one activated it and finally one nation suspended it.

The increasing social indifferences around the world led to fluctuation of supply and demand during the first half of 2010. Prices were somewhat stable and constant in years between 2011 to the mid 2014 after which the prices again destabilized due to speculation and so it took a dive in 2014. In the current scenario the prices have made record levels of low and continue to be among the red section of the stock markets due to various reasons.

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For any nation to progress and flourish it must have some economic framework that makes the smooth functioning of the country’s economy. Now when we talk about economic planning the main emphasis of the governments is to make full utilization of the countries resources. Full utilization is made by drawing up economic plans that guide us to it. Now according to HD Dickinson economic planning was “the making of major economic decisions -what and how much is to be produced and whom it to be allocated by the conscious decision of determined authority, on the basis of comprehensive survey of the economic system as a whole”.

Ever since India gained independence on 15th August, 1947, the founders of our constitution believed in the concept of planning. They introduced the Five-Year Plans concept of development and put it under the authority of the Planning Commission of India. The prime minister serves as the ex-officio chairman and the deputy chairman is appointed through a system of nomination and also from the same rank of the cabinet minister. Currently the twelfth Five Year Plan is underway and which came into motion of the completion of eleventh plan in March 2012.

The first Five Year Plan was commissioned on 1951 and ran till 1956, it was completely based on Harrod-Domar model and focused on balanced development of the economy with main emphasis on agriculture. The plan was a complete success as the national income rose by 18 percent and per capita income by 11%. The Second Five Year Plan also called P.C. Mahalanobis plan was from 1956 to 1961 and focused on industrialization and managed to have a growth rate of 4.1 percent.

When the third Five Year Plan came into motion and many things changed. A Sino-Indian war took place in 1962 and the weakness in the Five Year plan was shown, the government’s focus had changed and Defense Sector came into the limelight. After having fought a war with Pakistan between 1965 to 1966 India had took a major hit in the economy and soon after that was a severe drought in 1965 that further exacerbated the situation. Finally inflation hit India which was due the effects of war and drought the focus of the planning commission was to control the prices. The government had targeted growth rate of 5.6 percent but due to huge failure of this plan, the growth rate was around 2.4 percent only.

The government had to finally announce a Plan Holiday action plan which was a contingency plan that ran from 1966–67, 1967–68, and 1968–69. These three annual plans came under the Plan Holiday scheme and were the curtesy of the failure of the third Five Year Plan. Drought again was the main cause of concern in 1966 to 1967 but now whatever is the department equal opportunities were given, be it agricultural, its allied industries or the industrial sectors. Plan Holidays main reason was later deducted as war, inflation and the severe drought.

The plan holiday scheme were executed between the years 1996-69 and was with a budget of around 1600 crores, being an equal opportunity plan not only agriculture and development of community was emphasized but also on industries that produced chemical fertilizers, high quality seeds and irrigation facilities were improved. All these factors were the major cause for Green Revolution that later occurred in the country. The external factors were also responsible for the success of the Plan Holiday schemes like the monsoon favored agriculture among the last two years and so no drought like condition occurred. The annual growth rate touched 6.9 percent per annum and production of food grains reached 95 million tons in the year 1967-68.

Before the fourth Five Year Plan, the resources were distributed according to a set pattern and an objective mechanism. Gadgil Formula was finally adopted in 1969, since then Gadgil formula is revised with new set of variables that have helped with the term plans ever since. To sum up we can say that Plan Holiday was an emergency plan so as to mitigate the worsening situation of the economy and it was able to check inflation and food production thus making our economy stabilized.

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Green Gross Domestic Product also known as Green GDP, accounts for the environmental consequences of a country’s traditional GDP. It acts as an index of the growth of economy with the environmental implications of that growth which is related to a country’s conventional GDP. Green GDP tells us the biodiversity that is lost from a country and costs associated with climate change.

The reason why green GDP was evolved is that the conventional GDP has many limitations and cannot indicate the performance of economy and social progress effectively. The traditional GDP only calculates the gross output and by no means can find out the factors which are detrimental to the economy factors such as asset and wealth. This phenomenon creates problem as there is no accountability as to which factor is leading to the filling and depleting the resources. GDP also fails to answer if the present income levels are going to be stable in the long run or not. The original makers of the GDP concept himself said that “the three pillars on which an analysis of society ought to rest are studies of economic, socio-demographic and environmental phenomenon” he had worked the least in the environmental pillar.

The various national resources are not clearly undertaken as assets in the GDP, under the similar note the impact of depletion of resources and increased pollution on the future of productive capacity of a nation is not considered. All these factors worked together for the need of a better indicator of economic conditions and that would give the true sentiment of the resources and their usage under the guidelines of sustainable development. Hence the idea of green GDP was conceived and theoretically it was able to answer all the questions that were not possible to be answered by the conventional GDP. Green GDP was thought as an accurate assessment tool for the economy.

There are many theories regarding as to how we can find out a particular country’s green GDP, let’s talk about a popular theory which can be used to measure it. To find the Green GDP ,involves three steps the first one being Physical Accounting which discusses the present state of resources, their various types and the quantitative and qualitative extents in temporal and spatial terms. The second one is Monetary Valuation which involves finding out the green GDPs tangible and intangible parts and finally the third one which is assimilating it with national income. After accounting these terms get to know the green GDP.

Among the various countries of the world, China is the only nation that has majorly used the concept of Green GDP to measure the viability of its economy. The then Chinese Premier Wen Jiabao in 2004 informed the whole world that the green GDP concept would be soon replacing the traditional GDP as a measure of financial condition of the country. When Chinese reported their financial report in 2006, they used the green GDP and showed a major loss caused due to pollution as high as $66 Billion US which accounted for nearly 3 percent of the national economy. Now as the Chinese continued using the green GDP concept they found out that the economic growth of the country has took a nose dive and was nearly zero in few provinces owing to which the Chinese government stopped the use of the green GDP in 2007 and reverted back to using the normal GDP concept. Many independent organizations estimated that due to degradation of environment and depletion of resources from past decades have led to 8-12 percentage points of Chinas GDP growth. According to these estimates the Chinese economy actually had grown by zero if they had used the Green GDP concept.

India has shown the most promising country to work on the concept of green GDP and the then country’s environmental minister, Jairam Ramesh stated that it was possible for the scientists to estimate green GDP of India. Following that lines a practice was started in India headed by chief statistician of India Pronab Sen and was declared that the India’s GDP number will be adjusted accordingly so as to get an idea of country’s green GDP. As far as the world is considered, No country in the world uses the green GDP concept as a viable indicator to economy any more.

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Developed after the Keynesian model of economic growth, Harrod-Domar model aims to tell us the economies rate of growth by telling us in terms of savings and increase in capital. The true essence of this model is based on the assumption that there is actually no valid reason that can be explained naturally for an economy to develop in a balanced fashion. The founders of this theory were Roy F. Harrod and Evsey Domar . The followers of the Classical Economy school of thought, argued for the failure of the Harrod-Domar model because according to them the solution obtained from Harrod-Domar model was unstable and didn’t fixed the solutions. The dialogue between the Harrod-Domar and the Classicalists led to the creation of Solow-Swan model.

In the Harrod-Domar model, employment and income’s analysis were done for long duration of time and thus they considered the investment’s income and capacity. Their model showed that for a capitalist economy to attain a uniform growth the investment rate should be increased at a certain rate. In the Harrod-Domar model accumulation of capital plays a key role to determine the economic growth. The biggest difference between the Keynesian economists theories and Harrod-Domar Model was that the latter considered both sides such as long and short term while the Keynesian only used one side that was the short-term side of the economy. According to Harrod-Domar model, if one has to maintain full employability, the total expenditure by investing must suffice the added output that was developed by the investment. There should be a definite growth in the real national income to make sure that full employability is present which would then lead to steady growth rate. They also said that if we kept omn increasing the annual investment and there was no demand in the market then it would lead to underutilization of capital stock and such a situation is detrimental to growth.

The Solow–Swan model being an exogenous growth model is an extension to the Harrod–Domar model. The basic essence of this model provides an explanation of long term economic growth using the fundamentals of neoclassical theories like labor and productivity. The model was developed by Robert Solow and Trevor Swan in the year 1956 and acted as the extended version of the previous Harrod–Domar model. Now Solow extended the previous model by adding few other variables in the picture of Harrod-Domar model. The added variable includes labor which acted as the production factor and the rigidity of capital-labor ratios was also removed. The Solow-Swan Model had a short term implication that in short terms growth could be found by referring the steady state that was now created by capital investment change, growth of labor force and the rate of depreciation, the rate of savings affected the capital investment. In Long term implications, Solow model theorized that technological process can only bring growth. The Solow-Romer model is used to find growth in long term condition.

The various predictions of Solow-Swan model includes that the rate of savings and technological progress does not have any influence over the outputs growth rate. The increase in rate of savings is capital inductive as it increases the capital accosted per labor. The biggest implication suggested by the Solow-Swan model is the conditional convergence. Under the theory of conditional convergence if countries have the same variables like rate of savings, technology and growth rate of population which affect growth will ultimately converge to a particular state and it would be equal for all the countries. The other implication of this theory would be that if a poor nation has the same variables like a rich nation then both of them will have same constant growth rate in long duration. One can argue that the conditional convergence could not be possible but the validity of this theory was justified when the conditional convergence was observed in the northern states of the United States of America in the section of education policies, arrangements of institutions and trade policies with various other countries. Thus we can say that the Solow model is more advanced and realistic than Harrod-Domar model but without the Harrod-Domar maodel development of Solow model might had took a very long time.

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Gross national happiness index (GNH) is mainly used as a reference for Happiness index. The name GNH was given by Bhutan’s King, Jigme Singye Wangchuck in the year 1972. The dragon king made this decision to represent his commitment to his people in; building a better economy that would value Bhutan’s core beliefs first, instead of the Gross Domestic Product’s material values as measured by the western nations. Many people around the world have been influenced by the GNH philosophy and have led to happiness movement. GNH became an indicator of social and economic condition of a country, due to the efforts made by several scholars around the world. A major decision was made in 2011 in the United Nations, where a resolution was passed with 65 over 309 votes to place Happiness as the measure of global progress and development.

The GNH framework can be differentiated in four different branches that include a balanced and sustainable development, cultural values preservation, environment preservation and just governance. The GNH policy is now fully integrated in the Bhutan’s Five Year Plan and any policy made in the country must pass the GNH ideology which is done by carefully scrutinizing it by GNH impact statement which is on the similar note with the Environmental Impact Assessment done by various countries before approving any major project to see if the project is not harmful for the environment.
Being a refined philosophy having core values, the road to implementing at as an indicator was not so easy one in Bhutan, as the country faced various challenges from both political and international scenarios. The major problem that people raised against the GNH was that it would keep the spiritual and cultural values first over the economy and thus they argued it could destabilize the economy. Stating the theory was an easy job, but giving its mathematical statement was a really tough thing to do. For the GNH philosophy to be accepted by international authorities it had to struggle for almost 30 long years as the economists and policy makers raised doubts about its working structure. Since 2005 few indicators were developed that were able to measure the happiness score of the people by using data such as infant mortality rates.

A famous Israeli newspaper in 2012, advocated the use of GHN philosophy as the Israel’s development index and abandoning the use of conventional GDP which according to them gave incomplete results. In the next year a well-known US congressman with the help of researchers recommended the congress to find alternative indicators for measuring development. According to the report, various types of well-being surveys could be done for various dimensions of people live and the dimension having the least number of votes could be effectively improved. He also reported that the use GNH can also be made along with various other criteria that associate with them. In the year 2012 South Korea adopted Happiness Index has done through GNH theories. After seeing the success of GNH theory many local governments like that of the Government of Goa, India and few states of US have launched similar programs to find the happiness index of people under the guidelines of GNH. The government of Singapore and Dubai has started their own separate programs under the guidance of GNH theory.

Apart from the GNH, another index was developed to measure happiness which goes by the name Happy Planet Index (HPI), HPI takes into account of the well-being and environmental effects as stated by the New Economics Foundation since 2008. The working of HPI is such that it gives better scores for countries that have less environment related problems. According to this theory, the GDP fails to provide the many important factors like humans happiness state, as for most people being happy is the prime concern than being rich. In the ranking released in 2012 for 151 countries, the countries that ranked lowest were Chad and Qatar. Even though the HPI works but it has gained a lot of criticism recently as people said that HPI doesn’t account for the human rights and political freedom. To sum it up, we can say that GNH has worked wonderfully, though people have criticized it but its refined forms give very promising numbers and as far as HPI is considered, it has to upgrade its working structure so as to stop itself from redundancy.

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Many people among us sometimes confuse over the term economic growth and economic development and say it one for the other. Well it’s actually difficult to segment them and so we are here to discuss about the difference between economic growth and development. In a general sense we can say that Economic Growth has a distinct concept than economic development.

Economic Growth could be because of any number of reason and its root form it can be referred as increment in the national output level. The various reasons include high quality education that is now provided in the nation, technological improvement or we can say as increase in the valuation of the various goods and the services that are provided to the citizen of a country by various sectors. The best way to measure an economic growth is to see the country’s Gross Domestic Product or as we say it GDP. Economic Growth is not needed but alone it will not be able to justify economic development as for that few other conditions are necessary.

Coming to economic development, defining this is no easy task as it totally depends on an individual’s point of view and their take on morality. People are now free to think whether something is good, bad, right or wrong; it’s their own perspective. Now many people have tried giving definition for economic growth but the best one comes from Michael Todaro who said economic development was an increase in living standards, improvement in self-esteem needs and freedom from oppression as well as a greater choice. For general purpose we can refer to something known as the Human Development Index (HDI) to predict economic development. Now HDI takes care of various parameters such as literacy rate and the mortality rates, these factors affect the productivity and are responsible for economic growth.

Now we will see a few basic differences between economic growth and economic development. Economic Growth is all about increasing national income and development while Economic Development is all about increasing national income and people’s morality toward good by improving them. A well organized and structured organization is a must for having Economic Development while it’s not necessary for the latter. Even the approach is different among the two, as said by the economists, Economic Growth needs as quantitative approach while economic development needs a qualitative approach. The importance of Economic Development is far more then Growth as it tells us about the state of economy in a much wider form as compared to the growth. Experts focus more of their attention over economic development than growth.

One of the other approaches to look them is their duration, we can easily find out Economic Growth by looking at data monthly, yearly or per decade thus making it able to be distinguish in short term such as a year. In case of economic development we have to look for large duration of time which could include few decades together as it takes a large amount of time to change people’s view and the organizational set-ups. Also many a time’s economic growth relates to the problems faced by the developed nations while problems of development are a cause of concern for developing countries. While political scenario plays a major role in Economic Development, it has no effects on Growth.

Many scholars have related countries of their power to become self-sufficient with the Economic Growth and Development and postulated that Economic growth is not enough for a country to become self-reliant but Development offers a balanced growth and thus makes a country self-sufficient by reducing the dependency from foreign nations.

To sum it up we can surely say that Economic development aims for uplifting society by making it move in a forward direction in national income, savings and the entire organizational structure. Economic Growth only measures the Gross National Product (GNP) or by measuring the per capita income of the population. One can argue that Economic growth is not important as compared to economic development but the thing to observe here is that we can’t effectively measure economic development without referring Economic growth also the policy makers refer to the GNP values so as to find the economic growth seeing which they design various policies that run a nation.

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The savings rate problem has always affected US, though the negative savings rate was prominent in the in the years of 2002 when Americans had felt the touch of negative savings rate after a very long time since the Great Depression. Even though the savings rate of US was declining ever since the 1960s the decline gained traction in the 1980s. Now the negative savings rate had a real detrimental effect in the US economy. Even though the savings rate of US was declining ever since the 1960s the decline gained traction in the 1980s. Now the negative savings rate had a real detrimental effect in the US economy. But as the saying goes “to turn the table”, the American economic scenario was exactly reversed which was seen from the year 2008 onward when the problem of increased saving rate arose which has started again showing its detrimental effect on the economy.

Now there were various factors that led to the savings rate problem in the US and we shall see them accordingly. The root cause for this problem was that people spent too much money; a negative rate can only suggest that American people were going in deeper debts day by day. The American spending was upto so such extent that people had ran out of money and that too by taking debts which ultimately hit the economy, as slowly people started spending less as they had no money, which led to inactivity in the economy which led to recession. The consequence would include increased dependence on foreign nations. When the people of America would run out of money, they would have ultimately needed it from somewhere else; the money would have been provided by the foreign investors. Now Foreign Direct Investment (FDI) is a good thing but too much FDI could destabilize the economy by making the US Dollar lose its value in the international market. The biggest consequence would have been seen in the government spending. As the US population was now aging, the retired persons would not have enough funds due to the negative savings rate and thus would have been completely reliant on the social security and medical healthcare provided from the government. Parallel to which the working people would also not have been saving and thus when they would have retired with no funds to support themselves. Owing to this phenomenon the government would not have been able to function properly due to shortage of excess funds. Having to refill excess funds government would have to increase their spending which would further lead to increase in taxes and would further exacerbate the situation.

The savings rate problem was totally reversed from the year 2008 when the US Savings increased considerably as the American families saved more and spent less. Depending upon how fast the income grew the economy would take course in that direction. There are mainly two drivers for this increased savings, first being the rising debt of mortgage and the second was increased savings rate. American people started saving more since the year 2008 that really hurt the production sector as people consumed less. If people would continue to save then the rise in savings would affect in such a way that percentage increase per unit in the savings rate will account for reducing the spending by $100 Billion, which would then have a serious implication on the economy. But if the growth in economy remains positive then it will lead to lowering of household debts and also a slack to have a sufficient consumption.

If the American population would not increase their consumption then the economy would be in a serious trouble. In the past history American population were responsible for nearly three quarter of their GDPs growth from the year 2000. From the year 2000 the savings rate decline that reached -0.7 was majorly responsible for increasing the household debt in 2005. The American economy is closely scrutinized by the rest of the world and why it should not be as it is the economic superpower and the trade policies of various countries are linked to the US economy directly, whatever be the reason be American economy has always seen better days and so we can surely hope it recovers again and thus making other countries feel at ease.

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Goods, they refer to the goods that can be used or consumed by either everybody or nobody. The basic concept behind public good is that it cannot be made for a particular individual or a group of individual mainly due to the astronomical amount of cost associated with this. Taking an e.g. of a Bridge, now bridges are superstructures and they involve huge capital for their construction, now it wouldn’t make any sense if a government spends such huge capital only to allow its use for few selected individuals and hence bridges come under public goods as a public property. Now in technical language a public good is an economic good that has two properties inherent to it and those are non-rivalrous and non-excludable. Few e.g. of public goods include roads, clean air, national defence etc.

Non Rivalrous means that upon using the public good by one person should not exclude the opportunity of another person for using it. For e.g. A rock concert is going on and the organizers only allowed the people who paid for the concert to enter and enjoy the concert. But if the ground is large enough those people who didn’t pay for tickets can watch the show from those part of the ground that were not covered in the concert boundaries, and hence they can enjoy it too without harming the organizers profit or without increasing the concerts running cost.

Non Excludable means those people who can’t afford to pay for the good cannot be excluded from benefitting from the goods. For e.g. Roads, even if he or she can’t pay for the road construction as various taxes levied by the government but still he or she can use it as much as they like. Now public goods are of various types like Impure and Pure. Now impure public goods are those goods that partially provide the two conditions non-rivalrous and non-excludable. For e.g. the Gas connection to your house, the company can exclude your connection if they want, thus making it excludable. Pure goods truly follow the two conditions and there is no way to be excluded from them, for e.g. the National Defence. Till now everything we discussed was about the goods and services that we avail for free and its types which are dependent on two main conditions, but everything in this world has some type of problem is associated with it. In the case of Public goods and services there is also a term which is widely known as the Free Rider problem.

The Free Rider problem is becoming an increasing cause of concern because more and more persons seem to be doing it nowadays. The term free rider refers to any individual who deliberately ignore their social calls, but never back down from reaping the benefit that social call would have served. The easiest e.g. would be a municipal drives like that of cleaning beaches, parks etc. Now a free rider would deliberately ignore these social calls to help the municipalities but would never back down using the services of the clean beach. There are various options present to mitigate the free rider problem which includes abandoning such services which is really not feasible because the services needed outweigh the free rider problem by way too much, taking help from government, well this could be an imperative strategy, the government can force the free riders to contribute at least a little part or to call for support from volunteers.

The free rider problem can also be corrected by issuing Assurance Contracts according to which the person make a pledge that they will contribute a significant something to the society. The other type of solution is what is known as the Coasian solution, in this an individual persons can make an understanding to make their resources work as together which is based on each participating individuals interests. The only way free rider can definitely be solved is, an ideal society where individuals care about their community as much as they care for themselves and is just a utopian dream as such society is really not possible practically as not every one of us has same living and social standards.

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In the recent economic conditions, if we refer any newspaper or watch any news channel we would very easily find terms such as, Inflation, Deflation and Disinflation are becoming increasingly common to hear. For most of the common people we just have some general idea about inflation but when it comes to deflation and disinflation we have a hard time. Now these three terms are pertaining to a single term called as Price Level, meaning at what prices various commodities are available to us in the market, and are terms describing its various conditions.

Talking about Inflation, it is the general increase in the prices of goods and various services over a period of time. For e.g. Take the prices of goods that you used to buy few months back and now if you go and buy the same good and if you have to pay more for the same good , it would mean Inflation has affected it. Now one thing to understand is that whenever inflation levels of prices skyrockets the purchasing power of each currencies decrease and hence people can buy fewer amounts of goods and can avail fewer services for them. To measure inflation of prices we have to know the rate of inflation which we get from knowing the General Price Index, in most cases we use the Consumer Price Index (CPI).Inflation Rate is derived from the net annual increase in the percentage of Consumer Price Index. CPI refers to the variation of price levels in a basket market as for the goods and services that are availed by the customers. A term known as Hyperinflation is also associated with Inflation which refers to the economic condition of very high increase in the price levels, as it was never seen before.

Deflation, as the name predicts, is the condition when price levels fall. It’s just the exact opposite of Inflation. When the inflation rate goes below zero percent then that economic condition is referred to as Deflation. For e.g. Take the prices of goods that you used to buy few months back and now if you go and buy the same good and if you have to pay less for the same good , it would mean Deflation has affected the market. Now deflation is not that good for economy as it causes people to stop producing goods as they start getting reduced price for their produce. Various economists around the world have a consensus that deflation affects the economy in a bad way such as increasing debts and even worsening the ongoing recession in a country. Many people who have less idea of the working of economies like few politicians have sometimes even advocated Deflation but in reality Deflation in any country for a long period of time would be detrimental to its growth and development. The instance of Deflation was seen in the United States of America during the time of Great Depression when the prices of almost all goods and services felt abruptly.

Disinflation is in fact the most misunderstood term of all time, many people confuse it as just the exact reverse of inflation but it is not so much, Disinflation means a condition of impeded inflation, meaning the inflation levels have reduced but they have not gone below zero, as if it goes below zero Deflation would occur. In very simple terms it just means as decrease in the rate of inflation. For e.g. Take the prices of goods that you used to buy few months back and now if you go and buy the same good and have to pay a little more for the same good, (you would have observed this by comparing the prices when last time you went to buy the goods and had to pay more than what you are paying right now), disinflation would have occurred. Disinflation can also be understood by the unemployment rate, for e.g. If the rate of growth of unemployment is well above the natural rate of growth then the Inflation rate would go down and will result in Disinflation. For an economy to prosper each of the parameters should be closely monitored, most important being Inflation, as it decides the direction in which an economy is proceeding.

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