4.  Inflation can be defined as a
continuous increase in the general
price level of goods and services in
the economy
 Deflation refer to a decrease in
the general price level of goods and
services in the economy.

6. X 100
YEAR CONSUMER PRICE INDEX (CPI )
2010
122
2011
135

7. Demand - pull inflation
 Demand –pull inflation occurs when aggregate
demand (AD) exceeds the aggregate supply
(AS).
It is caused by a rise in AD which may be due
to rise in consumer demand, or an increase in
the government expenditure, or a rise in
investment by firm, or an Increase in demand for
the country’s export by people in foreign
countries or a combination of the four.

11.  MONETARY POLICY
 Moneytary policy which consist of controlling the
supply of money by central bank is enford by
using the different moneytary instrument aimed
at reducing the supply of money.
 Open market operations-selling of securities
or short-term bonds
 Raising the reserve requirement
 Raising the discount rate/bank rate
 Raising the interest rate
 Selective credit control policy

12.  FISCAL POLICY
 A deacrease in government spending
and an increase in the government’s
total tax revenue will produce a surplus
budget.
 Increase in taxes
 Decrease in government
spending

13.  DIRECT CONTROL MEASURES
 Price control and
rationing
 Anti-hoarding campaign
 Compulsory savings