Muhammad Zubair 7170Gcuf banking and finance

Inflation?Inflation?

Continuous Continuous riserise inin

pricesprices

Types of Types of Inflation Inflation according according to to RATE RATE

““When the rise in When the rise in prices is very low prices is very low like that of a snail like that of a snail

or creeper, is or creeper, is called Creeping called Creeping

Inflation”Inflation”

Prices rise Prices rise moderatelymoderately

Prices rise rapidlyPrices rise rapidly

Also called Runway or Galloping inflationAlso called Runway or Galloping inflation

Immeasurable and uncontrollableImmeasurable and uncontrollable

Prices rise very fast Prices rise very fast at double or triple at double or triple digit rate.digit rate.

Also called Runway Also called Runway or Galloping or Galloping InflationInflation

1.1. Demand pull Demand pull causescauses

2.2. Cost push causesCost push causes

Demand Pull InflationDemand Pull Inflation

When the aggregate When the aggregate demand increases demand increases

more than the more than the supply.supply.

Demand pull causesDemand pull causes

• High monetary expansionHigh monetary expansion

• Increase in wagesIncrease in wages

• Increase in populationIncrease in population

• HoardingHoarding

• Foreign remittancesForeign remittances

• WarsWars

• Natural calamitiesNatural calamities

Cost push InflationCost push Inflation

When cost of production increases the When cost of production increases the price level automatically increases.price level automatically increases.

Cost push causesCost push causes

Increase in indirect Increase in indirect taxestaxes

Increase in prices of raw Increase in prices of raw materialmaterial

Devaluation of moneyDevaluation of money

1.1. Monetary MeasuresMonetary Measures

2.2. Fiscal MeasuresFiscal Measures

3.3. Realistic MeasuresRealistic Measures

Monetary MeasuresMonetary Measures

• Bank rate policyBank rate policy

• Open market operationOpen market operation

• Variable reserve ratioVariable reserve ratio

• Credit rationingCredit rationing

Fiscal measuresFiscal measures

• Public borrowingPublic borrowing

• Public revenuesPublic revenues

• Public expenditurePublic expenditure

Realistic or Other measuresRealistic or Other measures

• Population planningPopulation planning

• Price control policyPrice control policy

• Political stabilityPolitical stability