Commecs Institute Of Business & Emerging

Sciences

PRINCIPLE OF MACRO ECONOMICS

Saad Iqbal BBA3

The rate at which the general level of prices for goods and services is rising and

purchasing power is falling

INFLATION

Demand Pull Inflation: Demand-pull inflation is dependent on the demand of goods which changes the price of the product.

Cost Pull inflation: Cost-push inflation changes when the cost of goods needed for production changes.

Pricing Power Inflation: When companies decide to raise the cost of their prices to increase their profits

Sectoral Inflation: When a certain sector increases prices across the board.

INFLATION

Pakistan’s Inflation Rate (2002-12)

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120.00%

5.00%

10.00%

15.00%

20.00%

25.00%

Inflation Rate

Food inflation stood low because of improved supply of food related items like potatoes tomatoes onion and vegetables.

Inflation across the world is building up due

to increase in global fuel prices which quickly feed into overall prices.

Devaluation of Currency also effect the

inflation rate, Government policies also result in devaluation of the currency.

Reason

Inflation Rate was high in 2008 mainly because of rising food prices, Devaluation of the rupee against the dollar and political unrest and a deteriorating law and order situation have all hampered government efforts to stabilize domestic prices through 2008-09.

Reason

Comparison With Bangladesh

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120.00%

5.00%

10.00%

15.00%

20.00%

25.00%

Yearly Inflation Rate

Pakistan

Bangladesh

YEARS

INFLA

TIO

N R

ATE

Proper taxation system Increase export Increase foreign reserves Stop corruption Devaluation of money Produce Electricity

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