INFLATION AND ITS EFFECTS ON

.INDIVIDUALS

ADEEL IFTIKHAR
.INTRODUCTION

 Inflation is the persistent rise in general price levels.

 Inflation causes things to go out of the affordability bracket.

 The word individuals refers to common-man.

RESEARCH OBJECTIVES.
 Effects ofinflationonwages (realand nominal)

 Effects onconsumerspending or purchasing power.

 Effects onfixedincomeearners( pensionsand bonds)

 Effects oneducationand health sector.

 Effects onutilities (gasand petrol)

 Effects ontaxationand governmentspending (fiscal policy)

LITERATURE REVIEW.
 Inflationandwelfare
publishedbytheeconometricsociety
authorRobertelucah.Jr

 Inflationstabilizationandtheconsumptionofdurablegoods
publishedbyBlackwellfortheroyal economicsociety

 Nominalwagerigidityandrateofinflation
publishedbyBLACKWELL fortheRoyaleconomicsociety

 Highinflationandrealwages
publishedbyPalgraveMacMillanjournalsonbehalfoftheinternational
monetaryfund
:LITERATURE REVIEW
 It is commonly asserted that a high rate of inflation is
inimical to economic growth.
 At one extrema, there is the view that a major reduction in,
or even the elimination of present high rates of inflation is a
pre-requisite to the attainment of reasonable rates of
economic growth.
 All of the articles which are mentioned above r thoroughly
analyzed to understand the inflation and its effects on all the
other things.
 Inflation is very dangerous for an economy but there should
be some inflation in economy up to 2,3 percent which will
attract the investors and economic growth will take place.
• Inflation is a disease which eats all the pillars of an economy and there is no
economy in this world who is safe from it.
• Inflation stabilization and the consumption of durable goods, inflation can
only be brought down at the cost of a recession.
• Which means in order to control inflation we have to sacrifice something else.
• If we decrease inflation employment rate will also be decrease , similar is the
case with investment, so it is so dangerous that it single handed can destroy
whole of the economy.
 In thearticle highinflationandreal wagesit examinedthat howsharpdeclinein real wages
effectsdirectlythehouseholds.
 In inflationwagesincreasesnominallybut inreal purchasingtermstheydecreases
 Furthermoreinflationin longrunisverydangerousfor aneconomicstructurewill leadto
all theother problemsif it isnot curedontime.
 Valueof moneydecreaseswithanincreaseininflation.
 Articlesshowedtherelationbetweeninflationandwelfarehowanincreaseininflation
will cut welfarewith morepercentage
METHODOLOGY
PRIMARY
 Primaryis fieldresearch.
 Seekinginformationdirectly
from a source.
 Type: Questionnaire.
SECONDARY
 Secondaryis deskresearch.
 Seekinginformationfrom an
indirect source.
 Type: Articles(Literature
review)
METHODOLOGY
 Sample size=30.
 30 questionnaires will be filled.
 Type Of Sampling:
 Simple random sampling.
 Snowball sampling.5
 VARIABLES

 Dependant:
 Independent:
• Income.(positive)
• Inflation. • Taxation.(negative)
• Savings.(negative)
• Investment.(positive)
• Risingcosts(pricelevel).(positive)
• Imports( negative)andExports(positive).
• Governmentspending.(positive)
• Unemployment.(negative)
• Interestrates.(negative)
• Business profits.(positive)
• Exchangerates.(negative if imports)
• Wage rates.(positive)
• Standardof living(negative)
 Government Unemployment
spending

Taxes Income
Inflation

Standard Consumption
of living
Trade
:QUESTIONNAIRE
 Aquestionnaire is aresearchinstrument consistingof aseries of
questionsandother prompts for the purpose ofgatheringinformation
from respondents.

 C:\Users\Adeel\Documents\AdeelQuestionnai
re.docx
:HYPOTHESIS
 Ho: Real income will remain same with an increase in inflation
H1:Real income will decrease with an increase in inflation

 Ho: Purchasing power has positive relation with inflation.

H1: Purchasing power has an inverse relation with inflation.

 Ho: Government spending can not decrease effect of inflation.

H1:Government spending can decrease effect of inflation.
 Ho: Standard of living is not effected due to inflation.
H1: Standard of living is effected due to inflation.

 Ho: Trade is not effected due to inflation.

H1: Trade is effected due to inflation.

 Ho: Increase in inflation will have no effect on taxes.

H1: Increase in inflation will effect taxes.

 Ho: Inflation causes unemployment to decrease.

H1: Inflation causes unemployment to increase.
 HYPOTHESIS TESTING

The single Regression Model is used for the testing of the Hypothesis.
Ho: Real income will remain same with an increase in inflation
H1: Real income will decrease with an increase in inflation

As t value is less than 2 so we do not reject H0.

 Ho: Purchasing power has positive relation with inflation.
H1: Purchasing power has an inverse relation with inflation.

As t value is less than 2 so we do not reject H0.

Ho: Government spending cannot decrease effect of inflation.
H1: Government spending can decrease effect of inflation.

As t value is less than 2 so we do not reject H0.

Ho: Standard of living is not affected due to inflation.
H1: Standard of living is affected due to inflation.

As t value is less than 2 so we do not reject H0.

H0: Trade is not affected due to inflation.
H1: Trade is affected due to inflation.

As t value is less than 2 so we do not reject H0.

ONE VARIABLE ANALYSIS

INCOME )1
CONSUMPTION (PURCHASING POWER))2
GOVERNMENT SPENDING)3
STANDARD OF LIVING )4
UNEMPLOYMENT )5
GRAPHS OF INDEPENDENT VARIABLE
INCOME X1 (box and whisker plot)
CONSUMPTION X2 (frequency histogram)
GOVERNMENT SPENDING X3 (dot plot)
STANDARD OF LIVING X4 (box and whisker plot)
UNEMPLOYMENT X6
(frequency histogram)
Correlation Analysis

Correlation analysis shows the relationship between the variables

MULTIPLE REGRESSION ANALYSIS
Constraints
Simple size taken is 30, so unable to get appropriate results from the research because in order to
.get accurate results simple size should be large

Conclusion
The research was carried out to analyze the effects of inflation on individuals in a society. It was
found that Inflation has a direct relation with each of us and it directly affects our life in many
ways. For example it decreases the income in real terms. Although it provides employment and
economic progress but it decreases the consumption power of a common man. In inflation
standard of living also decreases and people have to cut down many expenses. Government
spending also has a major role in inflation; if government starts giving subsidies in the period of
inflation then the pressure of inflation from a common man can be reduced like subsidies on
utilities etc. Income does increases in nominal terms but not in real terms so it directly affects the
consumers. By reading the articles deeply it can be concluded that government or the controlling
class should consider this problem very seriously and should work on it. Inflation is also
necessary for an economy but if it is anticipated and mild only. If inflation is unanticipated and
hyper then the things will become very difficult and it will create many problems not just for
individuals but also for the whole economy. Inflation in economy will give supernormal profits to
business which will eventually lead to economic growth and that will create jobs for the people
and unemployment rate will be decreased. For an growing economy inflation is a must factor or
you can say that you cannot get progress without inflation because inflation cannot be taken out
of an economic system it is a compulsory part of the economic system. So after all the primary
and secondary research it can be concluded that governments should keep an eye on the inflation
rate because it directly affects the lives on individuals and to keep it in a controlled rate is very
important for the economy.