In Pakistan the main reason of inflation is the increase in the prices of regular items, such as wheat, sugar, ghee and other items. Money drives themedia, money drives politics, people are influenced by the media,and we have modern democracy. Think how muchand how often you will need something before buying it. Unemployment is often used as a measure of the health of the economy. Under the circumstance, business firms may be deterred in investing.
Thus, inflation is caused by the interplay of various factors. Pakistan saw a very high rate of monetary growth between 1990-91 and 1995-96, averaging 18. English Essay, Junior English essays www. The economy has been observing double digit inflation growth on point-to-point basis since July 2007. Or inflation is attributed to budget deficit financing. The growth in wheat prices and exchange rate was low in some years and high in others. Although economies on silver and gold standards sometimes experienced inflation, inflation rates in such economies seldom exceeded 2 percent per year, and the overall experience over the centuries was inflation of close to zero.
Ayub Khan, Constitution, Defence Minister of Pakistan 910 Words 3 Pages Economic problem of Pakistan As we know Pakistan in an underdeveloping country. The government taxes did not cause any significant rise in prices in 2004-05 and 2005-05. Purchasing power and, hence, aggregate demand, may also go up if government repays public debt. If thisform of inflation which is not oil related really was a naturalphenomenon like we get told, we would also have just as muchdeflation - as per the law of averages. The public sector has used a mix of policies to control inflation, and it is.
There is a pressure to keep this down, as otherwise the fabric of society falls apart - Google hyperinflation Germany world war to see an extreme example of how we simply can't function if inflation is too high Inflation can arise from the supply side of the economy. It is inflation if the prices of most goods go up. It reduces the value of money, resulting in uncertainty of the value of gains and losses of borrowers, lenders, and buyers and sellers. Effects of Unemployment If people are unemployed, production of goods and provision of services falls off, and simultaneously, the people who are unemployed lack the wherewithal to purchase goods and services. Price level will continue to rise until aggregate demand equals aggregate supply.
However, their actual contribution towards inflation is debatable. We know that hyperinflation discourages savings. It is said that rich becomes richer and poor becomes poorer during inflation. This was due to a combination. Economic growth, Economics, Inflation 1562 Words 6 Pages Question: The Government of Pakistan offers health care for free or at nominal rates in public hospitals.
The assassination of Benazir Bhutto on December 27 has brought light to the major. On the other hand, people earning flexible incomes may gain during inflation. The inflated oil prices pushesup petrol and diesel, which in turn pushes up food prices and thatof other goods that need to be transported. In addition, adjustment with the new expected inflationary conditions may not be possible for all categories of people. As a rule, a part of the retrained personnel find a job at once. Financing of fiscal deficit through money creation adds to inflationary pressures. Prices of commodities are thereby increased.
Rising import prices are also considered an important factor for inflation. Core Inflation Rate in Pakistan averaged 7. First, increased domestic demand created an output gap, putting upward pressure on prices. Is there any need to worry about inflation? Before beginning with the causes we would like to mention the meaning of inflation. Negative effects of inflation include an increase in the opportunity cost of holding money, uncertainty over future inflation which may discourage investment and savings, and if inflation were rapid enough, shortages of goods as consumers begin hoarding out of concern that prices will increase in the future.
Similarly, beneficiaries from life insurance programmes are also hit badly by inflation since real value of savings deteriorate. All this can have devastating effect for the prices. Built-in inflation is a type of inflation that results from past events and persists in the present workers believe that prices will rise so they demand more wage. Several supply and demand factors could be responsible for this surge in inflation. Inflation in Bangladesh and Policy Responses a. The increasing uncertainty discourages saving and investment.