Economic Disease – Inflation
Written by Ali Asghar
Economic Disease – Inflation
Inflation is the situation where the prices of the goods and services rise and the purchasing power of the money decreases that effect the real value of money and also show the actual position and growth of the economy of a country.
Demand Pull Inflation:
It is the situation where the government of the country encourages the excessive supply of money in order to deal with the modern economic crises of a country. In this sense the level of income of the people rises, ultimately increases the quantity of goods and services demanded which resulted in the rise of price levels of goods and services and creates inflation.
Cost Push Inflation:
When the prices of raw materials and modern business machineries increase it directly affect the production cost. As the production cost increases the prices of the goods also increases and creates inflation within the country.
Causes
· Excessive supply of money to deal with modern economic crises.
· Rise in production cost.
· International Debts.
· Drop of currency rates in international market.
Causes of Global Inflation:
There are many causes of global inflation but the main cause of worldwide inflation is China. China has played a vital role in prices of different products all over the world. Most of the products of china are so cheap as compared to the rest of the world. The products of China are exported to many countries of the world like US, Europe, Pakistan and other countries. The prices of the goods and services are rising in China. The goods like steel and other materials are the major issues. Service industries are also badly affected due to increase in energy cost. Due to major blackouts of electricity in China the industrial sectors are badly affected and forcing the prices to meet at higher level. Manufacturing industries are badly facing the problems of power supply in China which results in higher production cost and increase in the price of goods exported to other countries creating the inflation on international level. Different necessities of life including food items are also the main discussion points which cause higher export prices.
Effects
Now a days, the economy of most of the countries is largely affected by the pressure of inflation, specially a greater pressure on under developed and developing countries like India, Pakistan and other countries of the world. When the economy of a country faces high inflation rate it will fall down the level of employment within the country, the quantity demanded of the different goods also decrease, production cost increases, purchasing power of the money decreases etc.
Inflationary Effects in Pakistan
Pakistan is a developing country and facing high inflation rates in the past year. The inflation rate of Pakistan was 22.35% in the year 08-09 which is so high which also affects the level of employment of the Country. However the rate of inflation was just dropping down and 13.68% inflation rate was recorded in the month of January 2010 which is far better than the previous year January 2009 in which 20.52% inflation rate was recorded and the unemployment rate in January 2010 was 5.20%. Pakistani government is still taking measures to reduce the inflation rate in single digit.
Analysis of Inflation Rates in Pakistan for last 3 years
