Topic: Inflation

Arslan Waseem

Muhammad Owais

Muhammad Bilal

Hussnain Manzoor

Khalil Yousaf

Fahid Ali

Inflation is a state in which the value of the money is falling and the prices are rising and this is the bad situation for any country to get themselves into the balance and for the person as a single as well. Another definition we have of inflation is this “Inflation occurs when the general level of pries and cost is rising”, You can say that “Too many dollars chasing too few goods”.What happens during InflationOil/Petrol prices rises.CNG Prices rises.Paddy/Wheat prices rises.The main one is this that the salary is not too much too meat the common needs of life for a common person.

Inflation makes some people worse off, but it makes others

better off

Ex: 1. Increase in Gasoline prices affect the Truck drivers

more but barely affects people who go to there work by

walk and economy vehicles

2. College tuition fees has risen almost twice as fast as

average prices over the past 10 years, which hurts you a

lot,but may have little impact on a married couple with no

children.

3. Poultry diseases causes a rise in the prices of Non-veg

food items and affect people who eats more of Non- veg

food items but it barely affects people eating Veg food.

4. People in Cities get affected more than people in small

towns and villages

Prices for goods and services mean income for some people. So, as some prices increase fasterthan other, some people’s income increase faster than

others.Ex: 1.Due to increase in number of automobiles working on Gasoline increased, due to this most of the Oil companies

record very high amounts of improvements in profits every year

2. Due to ever increasing in pollution, the number of people suffering from different diseases also increased which gave

chance to many pharmaceutical companies to improve profits every year

3. All the retail stores working on % profit’s increase there income when ever there is increase in prices of goods

1. Inflation redistributes income between Borrowers and

Lenders

2. Inflation benefits the borrowers and hurts the lenders

Reason: As the value of money decreases at higher

rate

Demand and Supply

Prices rises whenever either more demand for the good or when there is the shortage of the supply for that good.

Types of Inflation

Demand Pull Inflation

Cost Push Inflation

It is the situation occurs when the ability of the people to spend rises more rapidly than the availability of the good or services.

In the diagram AD shifts to AD’ because of increase in the demand and that

result in the increase of price level from P to P’ and increase of real GDP

from Y to Y’.

This is the situation occurs when the rising costs results in increase in the prices of the goods and services.

There are two main sources of increased costs

An increase in the money wage rate

An increase in the money price of raw materials, such as oil.

In the above diagram SRAS shifts to SRAS’ because of decrease in supply & thatresult in increase of price level from P to P’ & decrease of real GDP from Y to Y’.

The Control of Inflation:Monetary measures:Classical economists are of the view that inflation can be checked by controlling the supply of money. Some of the important monetary measures to check the inflation are as under:Control over money:It is suggested that to check inflation government should put strict restrictions

on the issue of money by the central bank.Credit control:

Central bank should pursue credit control policy .In order to control the credit it should increase the bank rate, raise minimum cash reserve ratio etc. It can also issue notice to other banks in order to control credit Other measuresIncrease in the production: One of the major causes of the inflation is the excess of demand over supply ,so

those goods should be produced more whose prices are likely to rise rapidly .In order to increase production public sector should be expanded and private sector should be given more incentives.Proper commercial policy:Those goods which are in scarcity should be imported as much as possible from

other countries and their export should be discouraged.Encouragement to savings:During inflation government should come out with attractive saving schemes. It may issue 5 or 10 year bonds in order to attract savings.

In Pakistan, most important categories in the consumer price index are food and non-alcoholic beverages (35 percent of total weight); housing, water, electricity, gas and fuels (29 percent); clothing and footwear (8 percent) and transport (7 percent). The index also includes furnishings and household equipment (4 percent), education (4 percent), communication (3 percent) and health (2 percent). The remaining 8 percent is composed by: recreation and culture, restaurants and hotels, alcoholic beverages and tobacco and other goods and services. This page provides - Pakistan Inflation Rate - actual values, historical data, forecast, chart, statistics, economic calendar and news.

Pakistan is also a failed nation with respect to political leadership. No leadership has ever come with honest intentions. Every person took the charge of higher rank and robbed this country as much as he could. But some of them were capable enough to make economy look good.

The inflation rate of Pakistan during PPP regime is as follows: during 2007-08, it was 19.27, 2008-09 it was 14.39, 2009-10 it was 13.07, 2010-11 13.23 and in ongoing fiscal year it is 10.1.

Inflation rate and GDP comparison shows that despite of constant investment as claimed by govt. inflation rate is on rise and GDP rate is on decrease. This shows how PPP has spent these four years of her regime. Indeed corruption is the only thing this govt. did honestly.