Originally Posted by Atif692

yea sahar it has opposite effect.... simply u can understand with this example... with decrease in discount rate money supply will increase in the economy (now question is how money supply increase in economy? money supply increases due to decrease in discount rate because people tends to borrow more loan from banks when discount rate is lower which causes increase in money supply in economy), when money supply increases in economy then purchasing power of people increase and they are willing to buy goods or services at higher prices which causes inflation... one thing for yours information...we have heard that inflation rate of pakistan is 14.3% what does it mean? i can give u a example you can understand... 6% inflation rate means 100% increase in prices(double price) now u can imagine in pakistan its more than 14%... i hope u will understand....