Hello viewers, welcome to Info Thirst today we are going to discuss the yo yo effect in the field of economics. Before we get into the topic we would like you to Follow us by clicking the follow button. Now that you have done that...So let's dive into it…
2020 was weird in countless ways, which means the economy in 2021 will also be weird in countless ways.
The yo-yo effect in simple words means, price of any goods or services changing drastically and returning to its original price in a very short span of time.
Due to the price of many goods and services in India disintegrating after March, resulted in an economic crash. Most of those prices have been recovered to almost normal levels, but in the arithmetic of annual inflation, it doesn't matter. Now let’s say, the basic trend line of the price of those items is fairly stable, the year’s inflation report will be extraordinarily high.
For instance, the overall Consumer Price Index rises by June at a rate consistent with 2 percent annual inflation, it will show a 3.2 percent year-over-year rise from the depressed May 2020 level. That would be the highest level since 2011, but is misleading, a result of “base effects” rather than the true longer term track of prices. For many individual products and services, those numbers will look even more extreme.
The most important thing to know about the yo-yo effect on prices is to be aware of people who might grab the opportunity to use these numbers to create misleading narratives about the level of inflation in the economy.
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