Inflation is defined as a persistent increase in the general price level over time. It is caused by demand-pull factors like increased money supply or cost-push factors like higher production costs. Consequences of inflation include a decrease in purchasing power, inequality in income distribution, and negative impacts on exports and government spending. High inflation over 50% per month is considered hyperinflation and can lead to drastic increases in prices over time. Pakistan experiences inflation due to factors like increased money supply, non-productive expenditures, and foreign remittances. It is advised to invest in long-term assets rather than cash during inflation.

1. 01 What is INFLATION
02 Causes of inflation and its impacts
03 Consequences of inflation
04 Inflation impacts on economy

2. INFLATION

3. INFLATION
 “Inflation is the persistent increase in general
price level”
 Decrease in the purchasing price of money
 General increase in the price of goods and
services in an economy

4. INFLATION RATE
• Inflation rate is the percentage
increase of decrease in prices
during a specific period,
usually a month or period.
• It analyze the general price
level in percentage
Rate =
CPI 2 – CPI 1
CPI 1
X 100

5. CAUSES OF INFLATION
DEMAND PULL INFLATION:
its also called Price inflation.
When Aggregate demand
become more than Aggregate
supply in the economy.
 Cut in interest rate
 Higher wages
 Increased money supply
Demand pull inflation

6. CAUSES OF INFLATION
Cost push inflation
COST PUSH INFLATION/ Wage push inflation
When aggregate demand is same and there
is increase in cost of factors of production
and decrease supply of goods in the
economy.
 Increase in Cost of production or wages
 Increase in prices of goods
 higher indirect taxes

7. OTHER CAUSES OF INFLATION
 Increase in public spending
 Population growth
 Trade unions
 Imposition of indirect taxes
 Price rise in international market
 Government spending

8. Favorable impacts of inflation
 Higher profits
 Better investment returns
 Increase in production
 Better income

9. Unfavorable impacts of inflation
 Low purchasing power
 Inequality in income distribution
 Upsets the planning process
 Lenders face losses
 Negative impacts on exports income

10. OTHER EFFECTS OF INFLATION

11. CONSEQUENSES OF INFLATION

12. A
Lower savings D Resource allocation
B
Production
pattern
E Government
spending's
C
Irrationality of
consumption
F Black marketing

13. 0
1
Price of goods
0
2
0
3
0
4
0
5
0
6
Standard
of living
Government
measures Erosion of
quality
Fiscal debt
Unequal
Wealth

14. HYPERINFLATION
• Hyperinflation is often defined as inflation that exceeds 50 percent
per month, which is just over 1 percent per day.
• Compounded over many months, this rate of inflation leads to very
large increases in the price level.
• An inflation rate of 50% per month implies a more than 100-fold
increase in the price level over a year and a more than 2-million-fold
increase over three years.

15. Inflationary factors in Pakistan
 Increase in money supply
 Non productive expenditure
 Corruption and black money
 Deficit financing
 Foreign remittances
 Foreign Aids

16.  Be wise when holding cash
 Invest in things that will serve you in
long time
 Be careful, when buying bonds
 Allocate your resources

17.  Domestic production should be
encouraged
 Development in various sectors
 Decrease unnecessary spending's
 Better strategic planning
 Allocation of resources