im afraid you are also abit wrong dear..Let me straighten up the issue...the inflation right now is due to over supply of currency as well as low production of goods(less suply). Low supply and higher demand makes price high..ok..now govt decreased rates...this will let people take out their money from banks and invest in those products which are lower in supply and having favorable prospects to invest in and thus they will make higher profits than they will be having in bank accounts..so goverment did this wid no intention of increasing money supply in market but to spur production and economic growth which will lead to higher goods supply and lower prices...yes money supply would increase but the fear of its disastrous affects could be in the case if industries are performing at its best(equilibirum exists in production and consumption) and therez been an inflation only bcs of higher number of currency notes out...i hope its the easiest way o elaborate..I second to Mr rao adeel and SA haider...

I tried but could not stop myself from posting.....respected forum members views on discount rate and inflation seems to be bookish and everybody is coming up with his/her own explanations...It is apparent that nobody over here has practical experience in economics and finance...Please refrain from discussing this topic in so much detail as you will only misguide others...There is a lot more to NAB interview than inflation....I by virtue of my 4 years experience in the industry as a financial analyst can elaborate on the topic but there is no need for it...As I said there is lot more to NAB interview than inflation....Forum members were doing a good job in discussing general interview questions..Please lets continue that as this topic is technical....

yes dear, you are right from a macro economic viewpoint if discount rate decreases and production is below full-producation then growth does take place. However, if the economy is already at it maximum level of production is the discount rate decreases then only inflation takes place. As far as where Pakistan's economy is at the moment that i will not comment upon because i have not researched it.

We are discussing this as Pakistan Case.

All these management sciences are interconnected and economics is not a separate case study apart from Finance. And if you study financial economics then you will have to study time value of money. There exists no economy without money

When all are not masters of finance, how they do care about rate of interest? And why will they withdraw money if they don`t have better options.

Purchasing power is inflationary sign where economic growth has exceeded much and per capita income is huge. I already said this is Pakistan case where economy is going down.

As interest rates drop, consumer spending increases, and this in turn stimulates economic growth. It will affect negatively when we have grown up economy.

Well conclusion or no conclusion, its upto you. I am not forcing my points. You can see tomorrow articles for more reference.

Discussion closed from my side as already much has been discussed. If someone wants more information, need to search on internet or books.

Now we come back to NAB interview.

Agreed, going back to interview questions,
So what if an interview question comes in the form as: does inflation and corruption have any correlation in an economy? what should be reply?

Speaking materially they do have positive relation as inflation lowers down the buying power of currency that directs an individual to generate more money, legally or illegally. And man seeks the easiest way so corruption is adopted as one of the illegal easy way when there is little chance of getting checked.

Dear Haider look at your above statement: where u accept that buying power is connected withe inflation. Ok

Now look at your following statement in previous thread:

you said:
3rd: Demand increases only if people have buying power and buying power is different from inflationary signs.

Here you say buying power is different from inflationary signs.
If we consider the case, in both cases the situation is of Pakistan.

when quantity of goods demanded increases it increases supply of goods and prices also increases and inflation goes up........

__________________
Strength lies not in defense but in attack.
"Adolf Hitler"

Guys differentiate:

Business,Commerce and Trade.

Be brief and to the point.

Thanx