INFLATION
The Islamia University Of Bahawalpur
BBS (M-1)2nd
Group Members
Mehnaz Akhtar 17Umair Khalil42
Mehreen Sohail 44Sidra Habib 167Shazia Ramzan 31Ayesha Shaheen06
Waseem Gill26
IntroductionDefinitionMethods to
measure Inflation
Types of Inflation
Causes of Inflation
Effects of Inflation
Measure to control Inflation
Inflation rateConclusion
“ Inflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when you had hair ”
Inflation means a persistent increase in the level of
consumers prices or a persistent decline in thepurchasing power of money, caused by an
increase in available currency and credit beyond the
proportion of available goods and services.
Meaning
In Economics, Inflation is a rise in the general level of prices of goods and services in an economy over a period of time.
Definition:
Consumer Price Index (CPI)
Wholesale Price Index (WPI)
Methods to Measure Inflation.
Current CPI/WPI – Last Calculated CPI/WPI
Last Calculated CPI/WPI
InflationRate
=
150 - 140 140
InflationRate = 100
100
= 7.12%
Umair KhalilRoll No.
42
Types Of Inflation
War Time Inflation
A) On the basis of the period of occurrence
Peace Time Inflation
1. Creeping Inflation.
2. Walking Inflation.
3. Running Inflation.
4. Galloping or Hyper Inflation.
B) On the basis of the rise in prices
C) Open and Repressed inflation
Open Inflation : Government takes no steps to control
price rice
Repressed Inflation : Price level check by Government
Mehreen SohailRoll No.
44
Comprehensive : All commodities available in the economy witness price
rise
Sporadic Inflation : Only a few commodities register a rise in price
D) Comprehensive and Sporadic Inflation
Partial : Before the stage of full employment
Full : After the stage of full employment is reached
E) Partial and Full Inflation
Demand Pull : Increase in the aggregate demand for goods and
services
Cost Push : a. an increase in wages b. an increase in the profit margin
F) Demand pull and cost push inflation
Sidra HabibRoll No.
167
Inflation is a persistent and appreciable rise in general level or average of price -Acc to ACKLEY
Causes of inflation
1. DEMAND side factors: Aggregate demand is greater than
aggregate supply
2. SUPPLY side factors:Aggregate supply fall short of
aggregate demand
Types of causes
1. Rise in Public expenditure - expenditure incurred by govt. - Aggregate demand is greater than aggregate supply
Demand side factors
2. Deficit financing - Expenditure is more than Income
CAUSES
Irving fisher’s quantity of money explains- “Increase in money supply with proportionate increase in output lead to rise in PRICE and fall in money VALUE”
Increase in Money supply
It is unearned income by public servants Excess demand lead to inflation
BLACK MARKET & CURRUPTION
Growth in population Growth in private expenditure Increase in ExportMoney reduction in direct taxes
OTHER FACTORS
Industrial disputes
Natural calamities
Artificial scarcity
Increase in export
SUPPLY SIDE FACTORS CAUSING INFLATION
Global factors [impact high oil price]
Fluctuating agricultural growth
Neglecting the production of consumer goods
Shazia RamzanRoll No.
31
Effects Of Inflation
Effects of inflation
Inflationary noise Effect on economic growth Effect on consumption and
economic welfare
Economic Effect of inflation
• Distribution of income.
• Distribution of wealth
• Different sector of society.
Wage earner Producer Fixed income people Borrower & lender Government Employment
Economic Effect of inflation
Ayesha ShaheenRoll No.
06
MEASURES TO CONTROL INFLATION
MONTARY MEASURES
FISCAL MEASURES
OTHER MEASURES
TYPES OF MEASURES TO CONTROL INFLATION
A) CREDIT CONTROL
B) DEMONETIZATION
C) ISSUE OF NEW CURRENCY
MONATARY MEASURES
A) REDUCTION IN UNNECESSARY EXPENDITURE
B) INCREASE IN TAXES
C) INCREASE IN SAVING
D) SURPLUS BUDGETS
E) PUBLIC DEBT
FISCAL MEASURES
A) PRICE AND WAGE CONTROL
B) INDEXATION
C) TO INCREASE IN PRODUCTION
D) RATIONING
OTHER MEASURES
Waseem GillRoll No.
26
Currency of different countries due to inflation
Inflation rate 89.7 %
German paper markOCT 1923Inflation rate 20.87%
r
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