inflation
DESCRIPTION
This presentaion have types and causes of inflationTRANSCRIPT
GROUP MEMBERS
Tariq Rahim Reg # 814 Obaid Ullah Reg # 816 Omer Ali Reg # 805
TARIQ RAHIM
Reg # 814 5th Semester Section B
OMER ALI
Reg # 805 5th Semester Section B
OBAID ULLAH
Reg # 816 5th Semester Section B
INFLATIONDefinitionCausesMeasurementEffectsInflation in Pakistan
Definition
1. An increase in the average level of prices of goods and services
2. Decrease in Purchasing power.
Inflation is not a reflection of any specific price, some go up and some go down. E.g, . . . . .
WE ALSO HAVE
Negative Inflation. Disinflation. Hyper Inflation.
NEGATIVE INFLATION Definition:
1. A decrease in the average level of prices of goods and services
2. Increase in Purchasing power.
It is also called Deflation. When the value of inflation goes in negative,
it become deflation or negative Inflation
DISINFLATION
Definition:
– A decrease in the rate of inflation
Disinflation is the value of decreasing inflation rate but not in the negative region.
HYPER INFLATION
Definition: A rapid and uncontrollable
increase in the rate of inflation is called Hyper Inflation.
HYPER INFLATION
* Hyper Inflation occurred in Germany during 1922-23.
* Savings became worthless
* Sacks of money required to buy food
* Borrowing ceased – Banking stopped
* Production came to a halt
* Unemployment rose tenfold
* German economy all but collapsed
MEASUREMENT
The rate of inflation is measured by the annual percentage change in the level of prices as measured by the consumer price index.
MEASUREMENT
CPI Item Weight CPI: An index of changes in average price of consumer
goods and services. CPI= (new price/old price)*10
Item Weight: Percentage of total expenditures spent on a specific product
MEASUREMENT
Average Inflation Rate. General Inflation Rate.
General Inflation:
Average Inflation Rate( f ):P( 1+ f )N= F
CPI CPI f
fCPI
CPI
f
CPI n
CPI
nn
nn
n
0
0
1
0
1
1
( ) ,_
_ /
_
where The genreal inflation rate,
The consumer price index at the end period ,
The consumer price index for the base period.
CAUSES
There are two types of causes of Inflation:
Demand Pull Cost Push
CAUSES
DEMAND PULL:
Defined as:
- Excess demand pulls up prices
Often caused by increases in government spending, such as wars
CAUSES
Faster rates of economic growth in other countries
CAUSES
COST PUSH:Defined as:
-Increase in Costs of Productions i.e raw Materials
There are two types of cost push Wages Push Profit Push
WAGES PROFIT
Definition:
-Attempts to increase wages faster than productivity
It is often caused by Unions
PROFIT PUSH
Definition:
- Attempts to increase profits by raising prices
Mostly large corporations are the cause of profit push
EFFECTS
-- Not all prices rise at the same rate
-- Not everyone suffers equally from inflation
Borrowers win because the real value
of their loan repayments decreases at the
same rate as inflation rises. If their incomes rise as well, they are
double winners.
EFFECTS
Real Life
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What This Means
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Next Steps
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