1. Presenters Afreh KwameElisante Kimabo Adeyemo AdewaleAyodeji Sunday Abel

2. Definitionof Inflation Types of Inflation Causes of Inflation Cost of Inflation Inflation in a country like Zimbabwe Inflation expectation in Europe Definition Deflation Causes of Delation Deflation Japan and Finland Conclusion 3. Persistent Appreciable increase General price level Goods and services Factors of productionORToo much money chasing few goodsInflation is an essentially monetary phenomenon. 4. Suppressed Inflation Creeping Inflation Strato-Inflation Hyper-Inflation/Galloping Inflation Staflation Bottleneck Inflation 5. When the inflation rate accelerate to several hundreds to many thousandsper cent per day, then we have hyper-inflation. Hyperinflation usually occur in a political crisis when a weak governmentloses control of the economy and turns to printing or borrowing money topay its debts. Examples of countries with this type of inflation are; Germany in 1923 when the rate of inflation hit 3.25 106 percent permonth (prices double every 49 hours) Greece during its occupation by German troops (1941-1944) with 8.55 109 percent per month (prices double every 28 hours). 6. Themost severe known incident of inflation was in Hungary after the end of World War II at 4.19 1016 percent per month (prices double every 15 hours). Morerecently, Yugoslavia suffered 5 1015 percent inflation per month (pricesdouble every 16 hours) between October1, 1993 And January 24, 1994. Zimbabwe 7. CountryMonth with Highest monthlyEquival Time highestinflation rate ent required inflation ratedaily for prices inflation to double rateHungaryJuly 19461.30 x 1016% 195%15.6 hours Mid-NovemberZimbabwe 2008 (latest 79,600,000,000,000 % 24.7 hours 98.0% measurable) 1.4 daysYugoslavia January 1994 313,000,000% 64.6%GermanyOctober 1923 29,500%20.9% 3.7 daysGreece November 194411,300%17.1% 4.5 daysChinaMay 1949 4,210% 13.4% 5.6 days 8. Demand-Pull Inflation: As a results of an increase inaggregate demand. Supply or Cost-Pull Inflation: Resulting from a reduction ora decrease in aggregate supply. 9. Distributional effects e.g weaker social groups in societysuch as pensioners on fixed income lose and also betweenborrowers and lenders Breakdown in the functions of money. Shoe leather and menu cost Foreign trade It is difficult to renegotiate some prices, and particularlywages. 10. ZIMBABWES chart topping inflation reportedly at24,000 % qualifies the nation as experiencing hyperinflation. Zimbabwes hyper-Inflation is a result of the monetaryauthority irresponsibly borrowing money to pay all itsexpenses and funding quasi-fiscal activities. ZIMBABWE is so short on consumer goods, thegovernment cant even calculate inflation, the chiefstatistician said on Tuesday(12.11.09) 11. Zimbabwes inflation -- already the highest in the world -- hit 7,634.8percent.The Zimbabwe dollar has strengthened against the U.S. dollar on the black market, rising to Z$1.5 million per dollar on Tuesday from a low of ZW$2.4 million. Scenario:"I came here at five (0300 GMT) and just got ZW$5 million. What can I dowith that money," an angry mother of two who identified herself only as Auxilia said as she left a bank where a long queue stretched for a couple of blocks.The amount is equivalent to three days of bus fare 12. Zimbabwean Central Bank to introducednew currency Salaries are falling to keep pace withgalloping inflation. Government introduced price controls Devaluation of the Zimbabwe dollar A reduction of lending rates Incentives for the manufacturing Mining sectors to stimulate exports. 13. Persistent tendency General price level Goods and services Factors of production Fall 14. A decrease in money supply Increase in the supply of goods Fall in the demand for goods 15. Deepening deflation will prompt the Bank of Japan tokeep interest rates near zero. Japan is suffering severe deflation, primarily because ofthe yens sharp rise and the downturn in world trade. Joblessness is rising at a record rate Analysts expect deflation to accelerate to a record rate incoming months as the worst global recession in 60 yearsforces companies to cut prices, on top of sharp falls incommodity prices. 16. Companies will have difficulty increasing profits companies effective burden from borrowing money will increase With job conditions worsening, consumption will remain weak 17. In 2008, CPI rose by 3.5% and on average by 4.1% from theprevious year. Prices of goods and services are still being depressed by loweredinterest rates as well as house and fuel prices. Prices of items like foodstuffs, rented housing and restaurant andcafe products are expected to rise more sharply than others. The CPI annual average will rise by no more than o.1% and indecember 2009 prices may actually be lower than one year earlier. Just last Friday, Finnish consumer prices shrank by 1.5 per cent inOctober, compared with Septembers deflation rate of one per cent. 18. Inflationrate can be controlled by thefollowing policies Monetary policyopen market operationIncrease in reserve requirementSpecial depositIncrease bank ratedemonetisation Fiscal policyHigh income tax/increase direct tax 19. http://www.newzimbabwe.com/pages/inflation180.17386.html Article by Prof. Steve H. Hanke, February5, 2009. http://www.cato.org/zimbabwe Finnish economic outlook for 2009 A handout on macroeconomics by Prof.Lawrence Adu Kofi(University of CapeCoast, Ghana )