What is INFLATION?

Inflation

refers to General rise in Prices

measured against a Standard Level of
Purchasing Power.

It

is the percentage change in the value of the

Wholesale Price Index (WPI) on a year-on year
basis.

Main CAUSES of Inflation

Demand-Pull

Inflation

- This type of inflation happens when the

aggregate demand increases more than the
supply.
- The economy demands more goods and
services than what is produced.

 Cost-Push

Inflation

- When the cost of production increases, the price

level automatically increases.
- It occurs when there is a shortage of supply
combined with enoughdemandto allow the
producer to raise prices.

 Money

Supply

- A third cause of inflation is an over-expansion

of themoney supply. The money supply is not
just cash, but also credit, loans and mortgages.
When loans are cheap, then there will be too
muchmoneychasing to few goods, creating
inflation.
- The prices of just about everything will
increase, even though neither demand nor
supply has changed.

EFFECTS of Inflation
Reduces

the Value of Money

Higher Unemployment
Higher Wage demands
Increase in Tax Revenue
Hoarding

 Reduces

the Value of Money

Inflation reduces the value of money thus making

you pay more in the process. As a result, the value of
themoney in handgets reduced and the amount that
you thought of depositing into savings is spent
covering the additional costs of purchasing
necessities.
Higher

Unemployment

Inflation is a possible cause of higher

unemployment in the medium term if one
country
experiences a much higher rate of inflation than
another.

 Higher

Wage demands

Price increases lead to higherwage

demandsas people try to maintain their real
living standards.
Increase

in Tax Revenue

The government gains from inflation through

what is called fiscal drag effects.

 Hoarding

People buy durable and/or non-perishable

commodities and other goods as stores of wealth,
to avoid the losses expected from the declining
purchasing power of money, creating shortages
of the hoarded goods.

Effects On Health Care

As patients start bearing the genuine cost of
their care, they will start behaving like real
consumers and become much more attentive to
price. Once health-care services provision is
transformed into a true marketplace in which
prices are driven both by supply and consumer
demand, competition between providers should
result in prices falling even further.

Philippine Inflation Rate

(March 5,2015)

Inflation Rate: Iloilo City

World Inflation Statistical Update

ADB Latest GDP,

Inflation Forecast to
2015
Sept. 25 -- Following is a table of forecasts for the annual economic
growth and inflation rates for Developing Asia through 2015 as reported
in Asia Development Banks latest Outlook supplement.

Policies To Reduce Inflation

1. Monetary Policy
- process by which themonetary authorityof a country controls thesupply of
money, often targeting an inflation rateor interest rateto ensure price
stability and
general trust in the currency

2. Supply Side Policies

- aim to increase long term competitiveness and productivity

3. Fiscal Policy
- involves the government changing tax and spending levels in order to influence
the level of Aggregate Demand

4. Exchange Rate Policy

- The exchange rate of an economy affectsaggregate demand through its effect
on export and import prices, and policy makers may exploit this connection.

5. Wage Control
- Wage growth is a key factor in determining inflation. If wages increase quickly
it will cause high inflation.