This document discusses inflation, including causes, types of measurement, and who wins and loses. It defines inflation as a general increase in price levels and describes several ways to measure inflation, including consumer price index (CPI), wholesale price index, and GDP deflator. CPI specifically tracks price changes in a market basket of consumer goods. The document also classifies inflation into cost-push, demand-pull, and structural types based on underlying causes. Finally, it notes that retirees, credit card holders, and those with fixed incomes tend to lose from inflation, while real estate owners, speculators, and some borrowers can benefit.

2. I N F L A T I O N
Causes of Inflation
Kinds of Measuring the Inflation
Losers and Winners in Inflation

3. Introduction
The increase in price level is a problem
to any country regardless of the prosperity
of the country.
Inflation - the situation of rapid general
increase in the price level. Inflation is
also one of the economic indicators –
meaning it indicates the current
situation of the economy of a country.
Hyperinflation – the over increase of the
price of the products

5. Kinds of Measuring Price
Increase
1. Wholesale Price Index and Retail Price Index
Wholesale Price Index and Retail
Price Index measure the changes of price
in intermediate goods, crude materials
and finished products in wholesale and
retail market.
*Intermediate goods – products which are need
to be processed to become finished
products.
*Finished Products – the outcome of the
production.

6. Kinds of Measuring Price
Increase
2.Producer Price Index
Producer Price Index measures
the change of price from the
perspective of the seller.

7. Kinds of Measuring Price
Increase
3.GNP Deflator or GNP Implicit Price
There is a big difference
between the price of the products
in previous and current year. The
GNP deflator is used to determine
the value of GNP of the previous
year with the formula

8. Kinds of Measuring Price
Increase
3. GNP Deflator or GNP Implicit Price
GNP Deflator = _Nominal GNP_ x 100
Real GNP
*GNP or Gross National Product – the total
value of the products and services made
by the citizens of a country in a year.

9. Kinds of Measuring Price
Increase
4. Consumer Price Index (CPI)
CPI shows the percentage of
changes of the price of the products
which are commonly bought by the
people.
Ways of Measuring the CPI
There are procedures in computing
the CPI. The products which are included
in the market basket are used to compute
the CPI.
*Market Basket – a group of products which are
primary needs of the people.

10. Kinds of Measuring Price
Increase
4. Consumer Price Index (CPI)
1. Weighted Price - Price multiply by the Weight.
Products Weight in kl
Price
2007 2008
Rice 50 22.00 24.00
Sugar 7 26.00 28.00
Chicken 15 100.00 115.00
Meat 10 115.00 130.00
Fish 21 80.00 95.00
Cauliflower 8 32.00 36.00

11. Kinds of Measuring Price
Increase
4. Consumer Price Index (CPI)
2. Total Weighted Price - To determine the TWP of
the year 2007 and 2008, all Weighted Price
should be added.
Products
Price
2007 2008
Rice Php 1,100.00 Php 1,200.00
Sugar 182 190
Chicken 1,500 1,725
Meat 1,150 1,300
Fish 1,680 1,995
Cauliflower 90 105
Total Weighted Price 7,758 8,759

12. Kinds of Measuring Price
Increase
4. Consumer Price Index (CPI)
3. Computing the CPI
The summation of the Total Weighted
Price will be used to compute for the CPI in
the year 2007 and 2008 with the formula:
CPI = ______TWP (Current Year)______ x 100
TWP (Based or Previous Year)

13. Kinds of Measuring Price
Increase
4. Consumer Price Index (CPI)
3. Computing the CPI
Using the data from the table:
CPI = __8,759__ x 100
7,758
CPI = 1.1290281 x 100
CPI = 112.9
*The Base year is being announced by the National Economic
Development (NEDA). It changes in accordance to the year when
the changes of price in the market are normal.

14. Kinds of Measuring Price
Increase
Computing the Inflation Rate
In order to compute for the Inflation or
Deflation, either of these formulas are being
used:
Inflation = ___CPI Present Year__ -1x100
CPI Previous Year
Or
Inflation = _CPI Present Year – CPI Previous Year_ x 100
CPI Previous Year

15. Kinds of Measuring Price
Increase
Computing the Inflation Rate
EXAMPLE
CPI 2006 =129.8
CPI 2007 =137.9
Inflation of 2007 = _137.9– 129.8_ x 100
129.8
= _8.1_ x100
129.8
=0.062x100
=6.2%

16. Kinds of Measuring Price
Increase
Computing the Inflation Rate
That means the price of the products which are
commonly bought by the consumer increases by
6.2% from 2006 to 2007.
If the answer is positive, that is inflation; if
negative, that is deflation.
Deflation – the decrease of price level of the products
in the market. This happens only in few instances
because the general price of the products is always
increasing.

17. Classifications of Inflation
Inflation means there is sustained
increase in the price level. The main causes of
inflation are either excess aggregate demand
(economic growth too fast) or costly push
factors (supply side factors)

18. Classifications of Inflation
1. Cost-Push
One of the basis in setting the price of
products is the expenses of production.
These are the salaries of the workers, the
increase of price of the intermediate goods
and the hoping of the sellers to have a
bigger profit.

19. Classifications of Inflation
2. Demand Pull
The Demand Pull Inflation happens when
the demand of products and services is higher
than the supply available at the market.
*Aggregate Demand – overall demand of all
sectors.
*Aggregate Supply – overall products which are
willing to supply by the businessmen for the
economy.

20. Classifications of Inflation
3. Structural Inflation
The inability of some sector to align with
the level and number of aggregate
demand to aggregate supply, the
competition between the Filipino wage
earners and Filipino profit earners and the
competition between the private and
public sectors are causing the structural
inflation.

21. Causes of Inflation
Inflation
Military Expenses Oil Deregulation
External Debt
Production Expenses
Monopoly and Cartel

22. Losers in Inflation
1. Retired people
High inflation rate often means
wage increases, but that won't
benefit those who are retired as their
pot of retirement money already is
set.

23. Losers in Inflation
2. Credit card debt holders
Most credit cards have a variable
interest rate tied to a major index such
as the prime rate. Because of this, credit
card holders experience quickly
climbing rates and higher payments in
an inflationary environment.

24. Losers in Inflation
3. People with Fixed Income
Salary earners whose income are
rising at less than the rate of inflation.

25. Winners in Inflation
1. People who own Real Estate
When inflation increases, the value
of their properties typically increases
so they get wealthier

26. Winners in Inflation
2. Speculators
These are the businessmen of real
estate business and buy-and-sell. They
bought the products for a cheaper
price and sell it with higher price.

27. Winners in Inflation
3. Borrowers
When the interest of debt is lower
than the level of inflation the
borrowers will benefit from it.

28. Reference/s
Thank you!