The Last Ten Year'S Price Stability Recorded

The last ten year's price stability recorded

in Bangladesh.

Economics is a science, which studies human behavior as a relationship between ends and scare means, which have an alternatives use. From this definition we can easily say that economics is keenly related with human life. To bring happiness in human life economic solvency is most important. To bring personal economic stability there need to macro economic stability in the country's economy. For this purpose macro economy has three basic goals. And maintain price stability in the economy is one of the most important macro economic objectives.

Before discussing the price stability of last 10 years recorded in Bangladesh we need to know about price stability, its measures and its importance for the economy.

Price-stability: the term "Price-Stability" means that the overall price level is either unchanged or rising very slowly. This price level can be shown from the average price of goods and services bought by customers and the ups and down of price level can be traced when more price have to give than the past for buying a good.

Economists measure price stability by a macro-economic tools of inflation rate or rate of inflation.

Inflation is defined, as a sustained upward movement in price and rate of inflation is the percentage change in the overall price level from one year to the next. Thus we calculate the inflation rate as-

There are three price indexes typically relied on as measure of inflations, the consumer price index (CPI), the producer price index (PPI) and the implicit GNP price deflator.

CPI =

PPI =

GDP Deflator =

Perhaps the most closely followed price index is CPI. the reason for this attention is that the CPI is designed to be a measure of the cost of a given basket of goods for urban consumers. And the price stability recorded in Bangladesh of last 10 years is presented in respect of annual percentage changes of CPI. but before presenting we will discuss more about price stability and its measures.

In general, inflation may, therefore be defined as a sustained risk in the general level of price brought about by high rates of expansion in the aggregate money supply. But price level stability not only dismissed by inflation there is other factor that is deflation.

A deflation occurs when prices decline. That means the rate of inflation is negative. But this term is hardly happen in the economy. So economists do not worry so much about it, but they are worried about inflation. It has some bad effect on the economy. The effects of inflation are as follows:

1. To bring the macro-economic stabilization we need to control inflation as it dismissed the price level stability and that will affect the factors of market and bring the disequilibrium in the economy.

2. An increase in the price level reduces the real money stock.

3. It reduces real balance and raises interest rates and reducing investment, aggregate spending and hence Equilibrium income.

4. It affects the demand and supply of the market.

5. It has direct effect on the general consumers. When prices are stable or fluctuate within a narrow range, individual's frame expectations about normal prices are based on past experience. When prices are rising, individuals, expectation of the prices they must pay, are disappointed. That they can purchase less- commodities within their income and consume less.

6. For increasing price level, wages are rises and producer will produce less as the shortage of investment and there will be shortage of goods and services in the economy.

7. For the rise in the price level the creditors are benefited and debtors are looser. Since the tk represent reduced purchasing power debtor have to repay with cheaper tk than they originally contracted for.

8. With high inflation, taxes become highly variable, the real values of people's pension are eroded, and people spend real resources to avoid depreciating tk.

There is a wide spread dislike of rising price level and public policy reflects this sentiments but price stability is also diminished by decreasing price level that is deflations. Deflation is also costly. Hence most nations seek the golden mean. When there is a deflation, the country, which has more goods, they purchase more goods and services and basically they are the developed countries. On the other hand those who have the shortage of goods they are the loser in this situations.

Period CPI Inflation(General) CPI Inflation(Food) CPI Inflation (Non-Food) CPI of Major Non-Food Items/Goods

General Point-to-point 12-Month Average Food Point-to-point 12-Month Average Non-Food Point-to-point 12-Month Average Clothing & Footwear Gross rent, fuel & lighting Furniture furnishing & other Medical care & health expenses Transport & Communications Recreation entertainment, education & culture Miscellaneous goods & service

Weight 100 End Period 58.84 End Period 41.16 End Period 6.85 16.87 2.67 2.84 4.17 4.13 3.63

1996-97 103.96 ... 3.96 103.67 ... 3.67 104.47 ... 4.47 105.42 103.36 104.56 103.32 108.3 104.85 104.56

1997-98 112.96 ... 8.66 114.51 ... 10.46 110.73 ... 5.99 110.03 110.78 110.46 107.54 115.97 109.49 110.67

1998-99 120.94 ... 7.06 125.16 ... 9.3 115.1 ... 3.95 114.03 114.61 116.06 115.39 120.7 113.99 114.94

1999-00 124.31 ... 2.79 128.52 ... 2.68 118.64 ... 3.08 118.45 116.31 118.21 122.55 127.9 119.79 116.91

2000-01 126.72 1.66 1.94 130.3 0.87 1.39 122.25 3.14 3.05 121.94 119.41 120.92 129.82 135.92 121.69 119.29

2001-02 130.26 3.58 2.79 132.43 1.94 1.63 127.89 6.14 4.61 124.62 124.95 126.07 136.22 144.36 131.03 123.47

2002-03 135.97 5.03 4.38 137.01 5.22 3.46 135.13 4.68 5.66 130.55 131.2 132.32 145.25 159.52 136.94 129.4

2003-04 143.9 5.64 5.83 146.5 6.64 6.92 141.03 4.26 4.37 136.25 136.19 137.95 154.36 170.74 141.31 133.82

2004-05 153.24 7.35 6.48 158.08 8.73 7.91 147.14 5.32 4.33 142.15 141.43 143.18 162.47 179.94 150.24 137.78