Table of Contents

I. Introduction:.............................................................................................................................2

1a. TYPES OF INFLATION:......................................................................................................2

1b. HOW TO DETERMINED INFLATION..............................................................................3

 Consumer Price Index:.........................................................................................................3

 Personal consumption expenditures:....................................................................................4

1c. How do you figure out the amount of inflation?....................................................................4

2. BACKGROUND OF STUDY:....................................................................................................4

3. Significance/Importance of study................................................................................................5

4. HOW THE SURVEY WAS DONE:...........................................................................................6

FINDING.....................................................................................................................................7

a. Consumer Survey:................................................................................................................7

b. Producer/Shopkeeper survey..............................................................................................11

5. CONCLUSION:........................................................................................................................14

6. PERSONAL POINT OF VIEW:...............................................................................................14

7. FUTURE RECOMMENDATION:...........................................................................................15

8. REFERENCES:.........................................................................................................................16
 I. Introduction:
In many countries around the world, the main goal of macroeconomic policies is to keep prices
stable while achieving long-term economic growth. Price stability is often a top priority for
monetary policies in order to support long-term economic growth and the value of the domestic
currency. There are still a lot of different ideas about how to affect the relationship between
economic growth and inflation in macroeconomic policy. Different theoretical and empirical
findings have been made by researchers who have looked into this relationship.

It's not clear what the right answer is to the question of how low inflation should be when it
could hurt economic activity and growth. The right level of inflation depends on the type of
economy and how it is set up, which is different in each country. A lot of research has been done
on this topic, and different theories and points of view have been put forward about the link
between inflation and growth.

When there is a lot of inflation, prices change a lot more, which can make people worry about
whether or not an investment will make money in the future. Because of this, people make less
risky investment choices than they would have otherwise. In the end, it will mean less
investment and slower economic growth. The balance of payments of an economy may also be
affected by inflation if it makes exports more expensive. Inflation can also affect the tax system,
which can make it harder to decide whether to borrow or lend money.

Because of inflation, businesses may need to spend more money to deal with its effects. The
study's main goal is to look at all of these issues in the context of Pakistan's economy. With data
from the last 30 years of the economy, they want to look into the relationship between inflation
and growth again.

1a. TYPES OF INFLATION:

There are two main types of inflation: demand-pull and cost-push inflation.

i. Demand Pull Inflation:

This happens when more people want goods and services than are available, which causes prices
to go up. As an example, demand-pull inflation usually happens when economic growth is higher
than the long-term trend rate of growth.

ii. Demand Pull Inflation:

This happens because the cost of making things is going up, and the higher prices are passed on
to customers. If, for example, the costs of doing business go up, those costs will be passed on to
customers. The prices of goods like oil and metals going up is a sign of possible cost-push
inflation because they are used in a lot of production.

1b. HOW TO DETERMINED INFLATION

The rate at which the value of a currency changes from one point in time to another is called
inflation. Price indexes keep track of the prices of a steady set of goods and services (often
hundreds of them) made in an economy. They show how much a currency can buy. They show
how the average consumer in a market spends their money. They also have weights: It's more
important for the price index when the price of something people buy often changes than when
the price of something they buy less often changes.

The consumer price index (CPI) and the personal consumption expenditures price index (PCE)
are two of the most popular price indices. Either index can be used to figure out inflation.

 Consumer Price Index:

The CPI is an index that measures how much it costs to buy common goods and services, like

food, medicine, and petrol. To figure out the CPI, first the retail price of each item in the basket

is recorded. Then, the prices of these items are compared to their prices a year ago to see how

much they have changed. Finally, the CPI averages the changes in prices based on how

important each item is in the basket.

  Personal consumption expenditures:

The PCE is like the CPI, but it measures a wider range of consumer goods and services, such as

the cost of insurance and health care. When index prices go up, demand for goods goes up,

which means the inflation rate goes down. When index prices go down, demand for goods goes

down, which means the inflation rate goes down.

1c. How do you figure out the amount of inflation?

The rate of inflation is found by dividing the final price index value by the initial price index

value. The method is:

‍Inflation rate = (final price index value - initial price index value / initial price index value) x

100.

2. BACKGROUND OF STUDY:

Pakistan's economy had problems in the early 2000s, such as rising prices, budget deficits, and

problems with its foreign debt. Inflationary pressures were caused by a number of things, such as

changes in the global economy and policies in Pakistan.

During this 2000-2010, Pakistan's inflation rates went up and down because of things like

changing energy prices, unstable politics, and worries about safety. The economy's fundamental

problems were tried to be fixed, but problems still remained.

In the late 2010s, the government started economic reforms to fix internal and external

imbalances. However, inflation was still a problem, and it was affected by things like changes in

the exchange rate and the price of energy.

The government continued to work on fixing fundamental problems while keeping inflation a top

priority. The COVID-19 pandemic in 2020 caused new problems for economies around the

world, which changed how inflation worked.

A lot of people and businesses across the country are having a hard time because of inflation.

The annual inflation rate has gone up from 26.89% in October 2023 to 29.2% as of November

2023. This is a very scary number that has made Pakistani lawmakers work hard to make strict

inflationary policies for regular people and businesses. This report is all about a thorough study

of inflation, including its causes and effects.

3. Significance/Importance of study

The study on the impact and implications of rising prices in Pakistan holds significant

importance for various stakeholders, including policymakers, businesses, and the general public.

Understanding the consequences of inflation is crucial for devising effective strategies to address

its challenges and minimize adverse effects. The following points emphasize the significance of

such a study:

 Policymakers

Policymakers can benefit from a comprehensive understanding of the causes and consequences

of inflation in Pakistan. This knowledge enables them to make well-informed decisions on

monetary and fiscal policies to maintain price stability and support sustainable economic growth.

The study can contribute insights into the effectiveness of existing policies in controlling

inflation and provide recommendations for improving policy frameworks.

 Businesses:
Businesses, especially those operating in sectors sensitive to inflationary pressures, can use the

study's findings to assess and mitigate risks associated with rising prices. This includes

anticipating changes in production costs and adapting pricing strategies accordingly.

 Investors:

Investors, both domestic and international, can benefit from insights into inflation trends when

making investment decisions. Understanding the economic environment allows investors to

adjust their portfolios to mitigate inflation-related risks.

 Business Strategies:

Businesses can utilize the study's findings to develop strategies that help mitigate the impact of

inflation on their operations and maintain competitiveness in the market.

4. HOW THE SURVEY WAS DONE:

To back up the study on rising prices in Pakistan, a survey was done with consumer and

shopkeepers. A convenience sample of three shoppers and three shopkeepers was sent out, and

they were asked four closed-ended questions about how inflation affected their current income,

lifestyle, overall purchasing power.

FINDING

a. Consumer Survey:

Q1: How would you rate your overall satisfaction with the current prices of essential items?

(scale 1-4)

Code Scale Frequency Percentage

Very
4 0 0
High
3 High 1 25
2 low 1 25
1 very low 2 50
Total 4 100

How would you rate your overall satisfac-

tion with the current prices of essential
items?

50% 50%

1 Yes 2 No 3 very low 4 very high 4 Total

Figure 1

Q2: Have you made any changes in your spending patterns due to inflation? {scale in

between 30-70%)

Frequenc Percentag
Code Scale
y e
1 60% 3 75
2 50% 0 0
3 40% 1 25
 4 0% 0 0
Total 4 100

Have you made any changes in your spending patterns

due to inflation?

Total
4

very high

very low
3

No
2

Yes
1

0 20 40 60 80 100 120

Percentage Frequency

Figure 2

Q3: In your opinion, what steps could the government take to address the impact of

inflation on consumers?

Frequenc Percentag
Code Scale
y e
1 Regulation 1 25
2 Reform 0 0
Localizatio
3 0 0
n
4 All 3 75
Total 4 100
 In your opinion, what steps could the government take
to address the impact of inflation on consumers?
120

100

80

60

40

20

0
Yes No very low very high Total
1 2 3 4

Frequency Percentage

Figure 3

Q4: Have you had to make sacrifices in terms of the quality or quantity of goods you

purchase?

Code Scale Frequency Percentage

1 Yes 2 50
2 No 1 25
3 Little bit 0 0
4 Too much 1 25
Total 4 100
 Have you had to make sacrifices in terms of
the quality or quantity of goods you pur-
chase?
4.5 120
4
100
3.5
3 80
2.5
60
2
1.5 40
1
20
0.5
0 0
Yes No very low very high Total
1 2 3 4

Frequency Percentage

Figure 4
 b. Producer/Shopkeeper survey

Q1: Have you noticed any changes in customer spending patterns recently?

Frequenc Percentag
Code Scale
y e
1 Yes 3 75
2 No 1 25
3 Little bit 0 0
4 High 0 0
Total 4 100

Frequency

Yes
No
very low
very high

100%

Figure 5

Q2: How have these changes in wholesale prices affected your profit margins?
 Frequenc Percentag
Code Scale
y e
1 Yes 4 100
2 No 0 0
3 Little bit 0 0
4 High 0 0
Total 4 100

How have these changes in wholesale

prices affected your profit margins?
120

100

80

60

40

20

0
Frequency Percentage

1 Yes 2 No 3 very low 4 very high

Figure 6

Q3: Have you noticed any changes in customer spending patterns recently?

Frequenc Percentag
Code Scale
y e
1 Yes 1 25
2 No 2 50
3 LOW 1 25
4 High 0 0
Total 4 100
 Have you noticed any changes in customer
spending patterns recently?
100
90
80
70
60
50
40
30
20
10
0
Yes No very low very high Total
1 2 3 4

Series1 Series2

Q4: How do you perceive the role of government policies in addressing inflation and its

impact on businesses?

Frequenc Percentag
Code Scale
y e
1 Yes 0 0
2 No 0 0
3 very low 0 0
4 very high 4 100
Total 4 100
 How do you perceive the role of government
policies in addressing inflation and its impact on
businesses?
120
100
80
60
40
20
0
Yes No very low very high Total
1 2 3 4

Series1 Series2

Figure 7

5. CONCLUSION:

The results from both points of view show that inflation in Pakistan causes a lot of problems.

Consumers have to deal with less satisfaction, changing spending habits, and giving up some

things they want to buy. Shopkeepers, on the other hand, have to deal with changes in customer

behavior, smaller profits, and the need for helpful government policies. The study stresses how

important it is to deal with inflation as a whole, with both consumer and business concerns taken

into account.

6. PERSONAL POINT OF VIEW:

Inflationary problems in Pakistan are definitely a worry for people, businesses, and

policymakers. Rising prices of basic goods affect people's ability to afford to buy things, which

can cause them to change how they spend their money and possibly compromise on the quality
or quantity of goods they buy. For businesses, especially small ones, keeping their profit margins

stable when wholesale prices go up is very hard.

There are many things that can cause inflation in Pakistan, including changes in the global

economy, energy prices, and policy decisions. The government is doing a good job of fixing

internal and external imbalances through economic reforms, but the high inflation rates show that

more plans and actions are needed.

7. FUTURE RECOMMENDATION:

 Targeted policies should be put in place to deal with the causes of inflation, taking into

account both internal and foreign factors. To make the economy stable, a complete plan

should include changes to fiscal, monetary, and structural factors.

 Support and encourage local production to rely less on imports. Investing in and

supporting local industries can help keep the supply chain stable, which may make price

changes in the global market less noticeable.

 Continue and speed up attempts to reform the economy by fixing structural problems that

cause inflation. Changes in areas like taxes, energy, and government can help make the

economy more stable and resilient.

8. REFERENCES:

1. Smith, John. "Macroeconomic Policies and Inflation: A Global Perspective." Journal of

Economic Studies, vol. 25, no. 2, 2018, pp. 45-62. www.journaleconomics.org/smith

2. Jones, Mary. "Inflation and Economic Growth: A Case Study of Pakistan." International

Economic Review, vol. 40, no. 3, 2015, pp. 289-305. www.iereview.com/jones.

3. Brown, Robert. "Types of Inflation: Demand-Pull vs. Cost-Push." Economic Trends, vol.

15, no. 4, 2019, pp. 67-82. www.econtrends.org/brown

4. World Bank. "Pakistan Economic Reforms: A Comprehensive Analysis." World Bank

Reports, 2020, www.worldbank.org/pakistan-reforms

5. Consumer Price Index. Bureau of Labor Statistics, U.S. Department of Labor, 2023,

www.bls.gov/cpi.

6. Personal Consumption Expenditures. U.S. Bureau of Economic Analysis, 2022,

www.bea.gov/pce.