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ECO403 GDB Fall 2020 Solution / Discussion Last Date: 22-12-2020

The prices of food in the country have risen radically throughout the year. The rise in the prices of wheat flour, sugar, vegetables and pulses are stimulating inflation in the country. There are several reasons behind the increasing food inflation in Pakistan. A main reason of rising inflation is that the economy of Pakistan had been undergoing broad-based inflationary forces during the past years due to the execution of stabilization policies intended to reduce the deficits in current and fiscal account. The pandemic of COVID-19 disrupted food supply chains which also caused high rates of inflation. The decrease in the production of major and minor food crops, predominantly wheat caused a huge decline in the supply and leads to rise in inflation.

Requirement: Logically discuss the effects of high inflation on the economy of Pakistan? You are required to discuss only two effects.

due date is 22.12.2020

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Eco403 GDB
There are Four Type Inflation Affect Occur:
Consumer Purchasing Power Decline:
As the result of rise in prices that is inflation prices of goods/foods shoots up and consumers with fixed income drastically affected by this.
Declined in National Saving:
As rising inflation issues adverse affect on the consumers from all walk of the life. Specifically fixed income section. Such consumers spends more of their income, so they have fewer amount to save-meaning on aggregate as is level of savings at national level reduce.
Fall in Investment:
Saving turns into investment, such as saving deposit and other opportunist. But low level of savings leads to low investment
Cost Prices Increased:
As cost prices increased than investment decreases and uncertainty increases.


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