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Inflation plain

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  • 1. Institute of Cost and Management Accountants of Pakistan INFLATION  Prepared For : Ministry of Economic Affairs  Prepared By : Talha Arfi  Registration# : 20090498 Date : Dec 08, 2010
  • 2. 2 STRUCTURE What is inflation? Inflation and our monetary system. Causes of inflation. Impact of inflation on our lives and society. Role of government to eliminate/ enhance inflation. Decline of our standard of lives due to inflation. Conclusion. Recommendations. Questions and answers.
  • 3. What is inflation? 3 Rise in the prices of goods and services. Decline in the real value of money. Loss of purchasing power.
  • 4. 4Inflation and our monetary system Discount rate Consumer Price Index (CPI)
  • 5. Causes of inflation 5 Excessive growth in the supply of money. Rise in production costs. International lending & National debts. Federal taxes on consumer products. Black money. Population growth. Deficit financing. Political Instability. Natural calamites. Food Inflation.
  • 6. 6Impact of inflation on our lives and society  Impact of inflation on our lives :  Hoarding.  Distortion of relative prices.  Cost of living.  Fixed income recipients will feel the heat.  Impact of inflation on society :  Lowers national saving.  Currency debasement.  Unemployment.  Poverty.  Economic uncertainty.
  • 7. 7Role of govt. to eliminate/enhance inflation  Monetary policies.  Subsidies.  Price system.  Lift certain import controls.  Increased interest rate.  Inflation targeting.  Regulate transfer of foreign currency reserves.
  • 8. 8Decline of our standard of lives due to inflation  High prices.  Financial problems.  Less consumption.
  • 9. Conclusion 9 Strategic planning to control inflation. Encourage domestic production. Investments in consumer goods. Subsidies for agriculture sector. Attract foreign investments. Monitoring system to evaluate the process.
  • 10. Recommendations 10 Low steady rate of inflation. Money supply must grow faster than Real GDP. Reduce imports and increase exports. Price support programs. Provision of subsidies. Increase production. Controlled circulation of currency. Controlled foreign exchange policy Avoid use of luxuries.
  • 11. 11
  • 12. Questions and Answers 12