This power point will give you the basic idea about inflation and how it occurs and remedies to control it........

2. Inflation ,Its Effects ,And
Their Remedies.
Mumtaz Ali Panhwar
12ME69

3. • Introduction
• Definitions
• Types of Inflation
• Causes Of Inflation
• Effects Of Inflation
• Remedies to control
Inflation
• References

4. INFLATION
•Inflation is defined as a sustained
increase in the price level or a fall
in the value of money.
•Inflation is a rise in general level
of prices of goods and services in
the country over a period of time.

5. • In a broad sense , inflation is that state
in which the prices of goods and services
rise on the one hand and value of the
money falls on the other .
•As the cost of goods and services
increase , the value of a currency
declines because you won’t be able to
purchase as much with that currency as
you could have last month or year.

6. Definition of Inflation according to few
Economists.
MEYER:
“ An increase in the prices that
occurs after full employment has been
attained.”
CROWTHER:
“ In the state of inflation, the prices
are rising , i.e., the value of money is
falling.”

7. Coulburn:
“ In inflation , too much
money chases too few goods.”

8. Explanation of above definitions of Inflation.
All the above definitions are
showing that inflation is a continuous
process and they also show that
inflation is a condition in which prices
rise and money value decreases.
Due to inflation , the real value of
money decreases , i.e., the purchasing
power decreases

9. Other Terms Related To Inflation
Dis-inflation:
The reduction of rate of inflation is termed as
Disinflation.
Stagflation:
High inflation combined with economic stagnation and
unemployment.

10. Hyperinflation:
An out of control inflationary spiral is known
as Hyperinflation.
DISINFLATION STAGFLATION
HYPERINFLATION

11. Types Of Inflation
1. Demand Pull Inflation
2. Cost Push Inflation

12. Demand Pull Inflation
•The demand for goods and services increases
and production remains same or does not
increase as fast.
•The excess demand results in prices being
pulled up.

13. •The demand pull inflation occurs
when total demand for goods and
services exceeds the total supply.
•This type of inflation happens when
there is an inflationary gap.
Demand Pull Inflation

14. Cost Push Inflation
• The cost push inflation is
caused by an increase in
the cost of production.
• Increased costs push up
the price level.

15. Causes of Inflation:
•Population explosion.
•Political Instability.
•Imported goods.
•Increase in wages and
salaries.
•Climatic factors.

16. Causes of Inflation:
• Oil prices.
• Corruption.
• Slow agricultural
development
• Slow Industrial growth.

17. Effects Of Inflation:
• Un employment
• Decreasing the
purchasing power
• Decrease in stock.
• Exports decline.
• Breakdown of monetary
system.
• Investment fall.

18. Remedies to control Inflation:
Inflation rate is increasing day by day.
Following are the some remedies to
control this problem…
1. Increase the supply of essential items .
2. Tight monetary policy.
3. Reduce government expenditures……

19. Remedies to control Inflation:
4. Reduce public borrowing by government.
5. Control deficit financing .
6. Provision of subsidies.
7. Explore new energy resources .
such as : solar energy , wind energy, and
construction of new dams, etc…

20. 8. Population control
Remedies to control Inflation:

21. Measures to control Inflation:
There are broadly three ways
of controlling inflation in an
economy.
1. Monetary Measures.
2. Fiscal Measures.
3. Direct or Other Measures.

22. 1. Monetary Measures.
• Most central banks use high interest rates
as the traditional way to fight or prevent
inflation.
• Decrease money supply.
• Decrease availability of credit from banks.
• Decrease currency control.
Monetary policy is the process by which
the monetary authority of a country controls the supply
of money, often targeting a rate of interest for the
purpose of promoting economic growth and stability.
The official goals usually include relatively stable prices
and low unemployment. Monetary policy is adopted by
central bank of a country.

23. 2. Fiscal Measures.
Fiscal policy is the deliberate
change in either government
spending or taxes, to simulate
or slow down the economy.
• Increase direct taxes.
• Increase indirect taxes.
• Reduce government spending .
• Increase in savings
• Surplus budgets

24. 3. Direct or Other measures.
It means the step of government
like rationing of goods and
freezing of prices and wages. The
government can also increase
voluntary savings of people by
giving them various incentives.
• To Increase Production
• Rational Wage Policy
• Price Control
• Control of smuggling
• Industrial peace
• Control of money supply
• No deficit financing
• Population control
• Simple living

25. Situation in Pakistan:
Today, inflation is one of the serious
problems faced by Pakistan. Rate of
inflation in Pakistan is very high.
According to economic survey 2009-
10, its rate is 13.3 %, According to ESP
2011-12, rate of inflation (CPI) is
10.8%.
Pakistan has an average of 11.6%
inflation per year.

26. 0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Inflation Rate
Pakistan’s Inflation Rate
(2002-12)

27. Comparison of Pakistan’s inflation rate
With Bangladesh’s Inflation rate.
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
INFLATIONRATE
YEARS
Yearly Inflation Rate
Pakistan
Bangladesh

28. References
http://en.wikipedia.org/wiki/Inflation
http://ahsankhaneco.blogspot.com/2012/04/inflation-in-
pakistan-its-types-causes.html
http://en.wikipedia.org/wiki/Economy_of_Pakistan
http://en.wikipedia.org/wiki/Inflation_in_Pakistan
http://finance.gov.pk/survey/chapters_13/07-Inflation.pdf
http://finance.gov.pk/survey/chapters_13/executive%20su
mmary.pdf

29. The 'cost of living', more than money
The price of death much too high
Give me a coffin, cheap & funny,
I'll blow it up with a sigh!
By: David Stewart