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(Inflation).pptx

  1. 1. 01 What is INFLATION 02 Causes of inflation and its impacts 03 Consequences of inflation 04 Inflation impacts on economy
  2. 2. INFLATION
  3. 3. INFLATION  “Inflation is the persistent increase in general price level”  Decrease in the purchasing price of money  General increase in the price of goods and services in an economy
  4. 4. INFLATION RATE • Inflation rate is the percentage increase of decrease in prices during a specific period, usually a month or period. • It analyze the general price level in percentage Rate = CPI 2 – CPI 1 CPI 1 X 100
  5. 5. CAUSES OF INFLATION DEMAND PULL INFLATION: its also called Price inflation. When Aggregate demand become more than Aggregate supply in the economy.  Cut in interest rate  Higher wages  Increased money supply Demand pull inflation
  6. 6. CAUSES OF INFLATION Cost push inflation COST PUSH INFLATION/ Wage push inflation When aggregate demand is same and there is increase in cost of factors of production and decrease supply of goods in the economy.  Increase in Cost of production or wages  Increase in prices of goods  higher indirect taxes
  7. 7. OTHER CAUSES OF INFLATION  Increase in public spending  Population growth  Trade unions  Imposition of indirect taxes  Price rise in international market  Government spending
  8. 8. Favorable impacts of inflation  Higher profits  Better investment returns  Increase in production  Better income
  9. 9. Unfavorable impacts of inflation  Low purchasing power  Inequality in income distribution  Upsets the planning process  Lenders face losses  Negative impacts on exports income
  10. 10. OTHER EFFECTS OF INFLATION
  11. 11. CONSEQUENSES OF INFLATION
  12. 12. A Lower savings D Resource allocation B Production pattern E Government spending's C Irrationality of consumption F Black marketing
  13. 13. 0 1 Price of goods 0 2 0 3 0 4 0 5 0 6 Standard of living Government measures Erosion of quality Fiscal debt Unequal Wealth
  14. 14. HYPERINFLATION • Hyperinflation is often defined as inflation that exceeds 50 percent per month, which is just over 1 percent per day. • Compounded over many months, this rate of inflation leads to very large increases in the price level. • An inflation rate of 50% per month implies a more than 100-fold increase in the price level over a year and a more than 2-million-fold increase over three years.
  15. 15. Inflationary factors in Pakistan  Increase in money supply  Non productive expenditure  Corruption and black money  Deficit financing  Foreign remittances  Foreign Aids
  16. 16.  Be wise when holding cash  Invest in things that will serve you in long time  Be careful, when buying bonds  Allocate your resources
  17. 17.  Domestic production should be encouraged  Development in various sectors  Decrease unnecessary spending's  Better strategic planning  Allocation of resources

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