This document summarizes inflation by defining it as a rise in the general price level where demand exceeds supply. It then outlines the main types and ways to measure inflation using indices like the Consumer Price Index. The major causes of inflation discussed are demand-pull, when aggregate demand is excessive, and cost-push, when costs of production rise. Some effects of inflation are a rise in import prices, lower savings, and income redistribution. The document concludes by explaining some control measures governments can implement including monetary policies like credit control, fiscal policies like tax increases, and boosting production.

1. Inflation
Presented By
Yasir Raza Adnan Ahmad Sheikh Nisar Sarwar
Amir Ahsan Fahim Ud Din

2. Contents : A Glimpse …
•Meaning & Definitions (Yasir Raza)
•Types of Inflation
•How to measure Inflation (Adnan Ahmad)
•Causes of Inflation (Nisar Sarwar)
•Control Measures (Amir Ahsan)
•Effects & Consequences of Inflation (Fahim )

3. What is Inflation?
Meaning :
 Simply when demand is more than the supply that
may lead to inflation
The rate at which the general level of prices for goods
and services is rising, and, subsequently, purchasing
power is falling.
Definitions :
“Inflation is nothing more than a sharp upward rise in
price level.”
 “Inflation is a state in which the value of money is
falling i.e. price are rising.”

4. Types of Inflation
Creeping Inflation (Increases Gradually )
 Walking Inflation (Moderate Rise …Up to 4-7% )
Running Inflation (Rapid Acceleration… 10-20%)
Galloping Inflation (Double or Triple Rise in Price)

5. World Wide Inflation Phenomenon

6. Inflation Trend

7. How We Measure Inflation?
 Consumer Price Index (CPI)
Specific to particular group in the population which
shows the cost of living of the group
Based on the changes in the retail prices of goods or
services & incomes
Different consumer price indices to tracks the changes
in the retail prices for different set of consumers
Reason for the different indices is the differing pattern
of consumers

8. Current CPI – Last Calculated CPI
Last Calculated CPI
Inflation
Rate
=
150 - 140
140
Inflation
Rate
=
100
100
= 7.12%
=

9. How We Measure Inflation?
 Wholesale Price Index
WPI published in 1902 & one of the economic
indicators available to policy makers
Replaced by the CPI market index in the 1970
Used to measure the change in the average price level
of goods traded in wholesale market

10. Causes of Inflation
The main cause of inflation is the increase in the demand of
goods and services and at the same time decrease in the
supply of goods and services.
 There are two theories related to the causes of inflation:
Demand-pull (when there is excess demand)
Cost-push (when costs rise)
 Other Factors
 Increase in Population
Black Money

11. Causes of Inflation
 Demand Pull Inflation :
Occurs when excess aggregate demand in the economy (overall)
or in a specific market or industry
Businesses respond to high demand by raising prices to increase
their profit margin

12. Causes of Inflation
Cost – push Inflation:
Occurs when costs of production or operation are increasing
Cost Push inflation is mainly caused due to the following factors:
· increase in wages
· increase in cost of raw material
· increased cost of
imported components

13. Effects of Inflation
 Effect depends on the speed of inflation and the nature of
the economy.
 Rising Prices of Imports
 Lowers National Saving
 Redistribution of Income & Wealth
 Collapse of Monetary system
 Adverse Impact Socially and Politically
 Discourages Investment & Savings
 Higher Interest / Income Tax Rates

14. Consequences Of Inflation
Adverse effect on Production
Adverse effect on Distribution of Income
 Obstacle to Development
Changes in Relative Prices

15. How to Control Inflation? Or
Control Measures
• Monetary Measures
• Fiscal Measures
• Other Measures

16. Monetary Measure
• Credit Control
• Demonetization of
Currency
• Issue of New Currency

17. Fiscal Measures
•Reduction in unnecessary
expenditure
•Increase in Taxes
•Increase in savings
•Adopt Surplus Budget

18. Other Measures
To Increase Production
Rational Wage Policy
Price Control

19. T h a n k s