Presentation of Economic Giography. Inflation
Transcript of Presentation of Economic Giography. Inflation
Semester: Spring, 2010-2011Sec: DProgram: Bachelor of Business AdministrationGroup Name: BOOK WORM
Name:Name: ID:ID: Email:Email: Contact Contact Number:Number:
Signature:Signature:
MAMUN MAMUN ABDULLAH ALABDULLAH AL
09-14301-209-14301-2 [email protected]@gmail.com 0167005285901670052859
ASHIQUZZAMAN, ASHIQUZZAMAN, MDMD
09-14063-209-14063-2 [email protected]@yahoo.com 0167558849801675588498
MAHMUDUL MAHMUDUL HASAN SHAKI HASAN SHAKI
09-14188-209-14188-2
SHAWON SHAWON MOHIBUL HAQUE MOHIBUL HAQUE
09-12916-109-12916-1 [email protected]@gmail.com 0167717794201677177942
It is a rise in the general level of prices of It is a rise in the general level of prices of
goods and services goods and services
It is continuous and considerableIt is continuous and considerable
Inflation is also an erosion in the purchasing Inflation is also an erosion in the purchasing
power of moneypower of money
What is Inflation
Types of Inflation
1. Creeping: 3% annual rise
2. Walking or Trotting: Rise between 3% to 6%
3. Running: Over 8% rise
4. Hyper Inflation or Galloping: 20% to 30% rise
5. Open: No limit to price rise
6. Suppressed: Administrative measures
Demand SideDemand Side
1. Increase in Money Supply1. Increase in Money Supply
2. Deficit Financing2. Deficit Financing
3. Increase in Public Expenditure3. Increase in Public Expenditure
4. Increase in Investment Expenditure4. Increase in Investment Expenditure
5. Increase in Export Demand5. Increase in Export Demand
6. Increase in Population6. Increase in Population
Supply SideSupply Side
1.1. Higher Wage RateHigher Wage Rate
2.2. Higher TaxesHigher Taxes
3.3. Higher Administered pricesHigher Administered prices
4.4. Supply ShocksSupply Shocks
5.5. HoardingHoarding
Effects on ProductionEffects on Production 1) Uncertainty in economy 1) Uncertainty in economy: Investment and production activities reduce: Investment and production activities reduce
2) Affects patterns of production: 2) Affects patterns of production: Resources directed towards luxuriesResources directed towards luxuries
3) Causes misallocation of resources: 3) Causes misallocation of resources: HoardingHoarding
4) Encourages speculation: 4) Encourages speculation: Quick and easy profitsQuick and easy profits
5) Reduces degree of competition: 5) Reduces degree of competition: Inefficient producers are protectedInefficient producers are protected
Effects on Distribution of Income1) Debtors and Creditors: Debtors gain, creditors lose
2) Profit earners: Sharp profits
3) Wage earners and Salaried class: Lose
4) Investors: Big investors gain, fixed-interest investors lose
5) Pensioners: Lose
6) Farmers: As a group gain, small farmers lose
Adverse effect on Savings: Reduced purchasing power
Effects on balance of payments: Imports increase, exports decrease
Effects on public revenue: More revenue earned from indirect taxes
Confidence in currency: Reduces
Social and Moral degradation: Burglary etc.
Political Instability: Major issue
1. Quantitative Credit ControlsSteps are taken by the BD Bank to reduce supply of money through credit
(a) Interest Rates (b) Open Market Operations (c) Variable Cash Reserve Ratio
2. Qualitative Credit controlsCentral banks are persuaded or forced by BD Bank to limit loans given
(a) Rationing of credit (b) Moral Suasion (c) Publicity
(d) Direct Action
Monetary Policy
Also called Direct Wage Control
Income in tune with production
Trade unions make it difficult
Income Policies
Increasing Availability of Goods
Increase the production of essential consumer goods
Raw materials for such products may be imported
Latest technology must be used
PRICE CONTROL AND RATIONING
Maximum prices of commodities are fixed
Goods are allocated to ration card holders
Encourages Black-Marketing