What Is Inflation

INFLATION :
According to gardener Ackely " A persistant I and appreciable rise  in the general level of prices is called inflation".


CAUSES OF INFLATION
There are so may causes of inflation in the less developing countries like pakistan.


DEMAND PULL INFLATION :
It is generated when the aggregate demand increases than the supply. Following are the causes of demand pull inflation in pakistan.


HIGH MONETARY EXPANSION :
The supply of money is expanding quickly every year but the supply of goods and service is not increasing according to that ratio. Due to this prices are rising.


FOREIGN REMITTANCES :
These are sent by the Pakistan who are working abroad to those families who are living in pakistan. Their purchasing power is increasing day by day. In other world their demand is increasing. So aggregate demand has increased then the aggregate supply.


FOREIGN AID :
The volume of foreign aid is also increasing with the passage of time. So when this aid is used inside the country it increases the demand.


CONSUMPTION HABITS :
In Pakistan urban particularly feels proudness in spending money on those items which are commonly used in the advanced countries. So there is a demonstration effect also in Pakistan. The increased expenditure has contributed the inflationary pressure.


CONSTRUCTION OF HOUSES :
Since 1970, the people are spending their savings in the purchase and construction of houses. So this expenditure has also contributed inflation.


NATIONALIZATION OF INDUSTRIES :
After the nationalization of industries in Pakistan the investors class is hesitating to do the investment due to the fear of nationalization. Now they are using their resources in speculation and in hoarding. So supply of production is hot increasing rapidly.


INCREASE IN POPULATION :
The rate of population growth in Pakistan and in other less developing countries is 3% to this aggregate demand is increasing day by day and price level is rising.