INFLATION

TOOBA KHAN

PRESENTATION PLAN Introduction.

Effects on Economy. Other Terms. Types of Inflation. Reasons of Inflation. Measures to Control Inflation . Conclusion.

INTRODUCTION……“Inflation is a rise in the general level of prices of goods and services in an economy over a period of time.”

EFFECTS ON ECONOMY…

GENERAL EFFECT

NEGATIVE EFFECT

POSITIVE EFFECT

GENERAL EFFECT

An increase in the general level of

prices implies a decrease in the

purchasing power of the currency.

NEGATIVE EFFECT High or unpredictable inflation rates are

regarded as harmful to an overall economy.

Negative effects of inflation include a decrease in the real value of money and other monetary items over time.

POSITIVE EFFECT…

Positive effects include a mitigation of

economic recession, and debt relief by

reducing the real level of debt.

OTHER TERMS …. DISINFLATION – the reduction of

rate of inflation .

HYPERINFLATION-an out of control inflationary spiral .

STAGFLATION – high inflation combined with economic stagnation and unemployment.

TYPES OF INFLATION..

Demand pull Inflation .Cost push theory .Pricing power Inflation .Sectoral Inflation .

DEMAND PULL INFLATION.. It is caused by increases in

aggregate demand due to increased private and government spending.

COST PUSH THEORY.. It is also called “supply shock

inflation”, is caused by a drop aggregate supply .

This may due to natural disasters , or increased prices of inputs..

PRICING POWER INFLATION. Pricing Power Inflation is more often

called as administered price Inflation.. This type of Inflation occurs when the

business houses and industries decide to increase the price of their respective goods and services to increase their profit margins.

SECTORAL INFLATION… The Sectoral Inflation takes place

when there is an increase in the price of the goods and services produced by a certain sector of industries …

REASONS OF INFLATION Lack of balance in the country’s budget. Financial problem, financing the deficit of

money by printing. Sudden increase in production costs. Significant increase in the level of energy

resources. Faulty structure of the economy . Exported goods far exceeding imported ones. Too many monopolies in the economy. Imported Inflation . Problems with financial planning.

MEASURES TO CONTROL INFLATION…

MONETARY POLICY

FISCAL POLICY

OTHER MEASURES

MONETARY POLICY… It aims at reducing money supply

in the market.

CREDIT CONTROLISSUE OF NEW CURRENCY

FISCAL POLICY.. It Majorly pertains to taxation and interest

policies .

REDUCTION IN UNNECESSARY EXPENDITURE

INCREASE IN TAX INCREASE IN SAVINGSURPLUS BUDGET PUBLIC DEBT

OTHER MEASURES … Are those which aim at increasing

aggregate supply addressing aggregate demand directly…

INCREASE PRODUCTION. RATIONALE WAGE POLICY. PRICE CONTROL. RATIONING.

CONCLUSION… From various monetary , fiscal and

other measures it becomes clear that to control inflation government should adopt all measures simultaneously.

Inflation is like a hydra-headed monster which should be fought by using all the weapons at the command of the government.

Presented by TOOBA KHAN . ICMAP .