GROUP 6

MAIMUNA GARBA KABO

FIRDAUSI GIDADO DAHEER
DAVID OLUSEGUN OJO
HARISU SAMAILA
 Inflation simply refers to too much money chasing too few goods,
or can alternatively be define as the persistence increase in the
general price level of a nation.
 Inflation is a quantitative measure of the rate at which the average
price level of selected goods and services in an economy increases
over a period of time. It is the constant rise in the general level of
prices where a unit of currency buys less than it did in prior
periods. inflation indicates a decrease in the purchasing power of
a nation’s currency.
Inflation is broadly divided into two(2) major types as follows

Ordinary inflation:
This is the gradual rise in the price of goods and services caused by
production, hoarding etc.

Persistent inflation:
This is the continuous rise in price of goods and service which is not
easy to control. This usually occur as a result of large volume of money in
circulation more than the available goods and services available.
Persistent inflation is also grouped into four(4) classes
Demand pull persistent inflation: - this occur when the demand for
goods and services is greater than their supply.
Cost pull persistent inflation: - rise in the price goods and services by
increase in the cost of factors of production.
Galloping or hyper- inflation:- such type are usually caused by deficit
budget, war etc…
Imported inflation: - as a result of importation of raw materials or
finished materials at a very high cost.
 Demand-pull inflation
 Cost pull inflation
 Structural inflation

 Demand-pull inflation
It takes place when aggregate demand is rising while the available supply
of goods is becoming less. There are two (2) principal theories which
are:
 The monetarists
 The Keynesians
 Cost pull inflation
Cost pull inflation theory basically means that prices have
been pushed up by increases in costs of any of the factors of
production. Cost push inflation streams out from the demand
for an increase in real wages by trade unions.
 Structural inflation
The structuralism of inflation, otherwise known as mixed
inflation is believed to be a combination of demand pull and
cost push inflation theories.
• Poor storage facilities
• General industrial strike
• Reduction of import
• Over population
• Natural disaster
• Decrease in production
• Increase in the cost of production
• When demand is greater than the supply
• Over reliance on imported goods
• Poor weather
Inflation effect different people and community in different
ways.
1.Social effect
2.Business effect
3.Debtors and creditors
4.Fixed income earners
5.Reduction in saving
 In economics, deflation is a decrease in the general price level of goods
and services. Deflation occurs when the inflation rate falls below 0% (a
negative inflation rate).
 Deflation also occurs when improvements in production efficiency
lower the overall price of goods
 Deflation usually happens when supply is high (when excess
production occurs), when demand is low (when consumption
decreases)
 Deflation also occurs when improvements in production
efficiency lower the overall price of goods.
 Competition in the marketplace often prompts those
producers to apply at least some portion of these cost savings
into reducing the asking price for their goods.
 1. Increased Productivity
Innovative solutions and new processes help increase efficiency, which ultimately leads to
lower prices. Although some innovations only affect the productivity of certain industries,
others may have a profound effect on the entire economy.
2. Change in Structure of Capital Markets
When many different companies are selling the same goods or services, they will typically
lower their prices as a means to compete.
3. Austerity Measures
 Deflation can be the result of decreased governmental, business, or consumer
spending, which means government spending cuts can lead to periods of
significant deflation
4. Decrease in Currency Supply
 As the currency supply decreases, prices will decrease so that people can afford
goods. How can currency supplies decrease? One common reason is through
central banking systems.
1. Reduced Business Revenues
Businesses must significantly reduce the prices of their products in order to stay
competitive. Obviously, as they reduce their prices, their revenues start to drop.
2. Wage Cutbacks and Layoffs
When revenues start to drop, companies need to find ways to reduce their
expenses to meet their bottom line. They can make these cuts by reducing wages
and cutting positions.
3. Changes in Customer Spending
The relationship between deflation and consumer spending is complex and often
difficult to predict. When the economy undergoes a period of deflation, customers
often take advantage of the substantially lower prices.
4. Reduced Stake in Investments
When the economy goes through a series of deflation,
investors tend to view cash as one of their best possible
investments. Investors will watch their money grow simply by
holding onto it.
5. Reduced Credit
When deflation rears its head, financial lenders quickly start to
pull the plugs on many of their lending operations for a variety of
reasons. First of all, as assets such as houses decline in value,
customers cannot back their debt with the same collateral.