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In ordinary terms inflation would mean a process of rise in the general price level technically speaking , Inflation means a persistent rise in the general price level in a country over a number of years. Thus different types of inflation exist at different places. depending upon the reason, which generates inflation. In Pakistan, general price level is persistently rising since partition of the subcontinent. Dearness is due to declining economic growth, expansionary policies, out put setbacks, higher taxes and a depreciation of Pak rupee. Generally the whole world is facing the problem of price like, but in Pakistan it has become a severe problem with more than 11% inflation rate per annum, which is the highest in the world. It is considered that inflation rate from 2 to 3% is necessary for the proper growth of economy but if it exceeds from this limit, then it becomes a problem. 1. Major cause of increase in the price level is an increase in currency or credit money. Increase in stock of money induces people to demand more and more of goods and services. The policy of deficit financing has led to increase the quantity of money in the country particularly after 1972. In January 1993 currency in circulation was Rs.166 billion, which has gone up to Rs.834 billion in June, 2007. at the end of the fiscal year 2007-08 it is more than 1050 billion. 2. To control this reason of price like, Govt. must follow stringent monetary and fiscal policies, as a preliminary step, central bank should adopt tight monetary policy to reduce currency expenditures should be reduced.
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Khalid Mahmood is the President and CEO of Vegalinks International, www.vegalinksInternational.com He is an expert in the field of financial management, business management, software engineering and consultancy systems. Mr. Khalid has been active in thi
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