Quote:
Originally Posted by Durrani Abid
My dear
expansion or growth in economy always lead towards inflation.
No2: why investors increase supply side and face decrease in the price that will hurt their profits.
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No.1 that occurs when there is enough supply to meet the demands of people but currently our inflation is because of shortage of supply side..... there is a optimal level at which economy is needed to perform beyond that optimal level and less than that optimal level there will always be inflation.... and currently our economy is performing below to that optimal level in that case there is need of monetary loosening..... and when inflation occurs because of reaching beyond that optimal level monetary tightening is done....
No.2 currently in Pakistan investment is at halt because of the increase in cost of production..... with the low interest rates the cost of borrowing (or cost of production) will get lower and with it their returns or profits will increase rather than decreasing..... and people who get lower returns from banks consider it preferable to invest in businesses to get higher returns.