Wednesday, December 22, 2010

Inflation

Inflation refers to a general increase in prices and a consequent fall in the purchasing power of money. The per capita income of a nation only indicates prosperity if it is higher than the rate of inflation.
In Pakistan, inflation is measured by four indices the Consumer Price Index (CPI). the Wholesale Price Index (WPI), the Sensitive Price Index (SPI) and the Gross Domestic Product Deflator(GDP deflator). In Pakistan, the Consumer Price Index (CPI) is considered the best indicator of inflation.
The inflation rate in Pakistan remained at an all time low during the 1950s at 2.6 percent, rising to 4 percent during the 1960s. It reached an all time high in the 1970s at 12.2 percent. It fell to 7.3 percent in the 1980s but rose to 11 percent in the 1990s. In other words, to maintain the present living standards in the country, the per capita income must increase by more than 11 percent annually.

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