STATE SENIOR HIGH SCHOOL, OYEWOLE AGEGE

WEEK: 3 DATE: 12th – 16th May, 2025 CLASS: SS 2

SUBJECT: ECONOMICS

LESSON TITLE INFLATION

SUBTITLE (IF ANY): Meaning, Types, causes, Effects and Control

PERIOD: 1st and 2nd Duration: 80 minutes

LEARNING OBJECTIVES: At the end of the lesson, students will;

➢ Differentiate between inflation and deflation

➢ Recall the types and causes of inflation and deflation
➢ Describe the effects of inflation
➢ Identify how inflation and deflation can be controlled
KEY VOCABULARY WORDS: inflation: an increase in quantity of money, leading to devaluation of existing
money. Deflation: a decrease in general price level. Disinflation: a decrease in the inflation rate.

RESOURCES & MATERIALS: Real Object (₦500 notes, ₦1000 notes, ₦200 notes, etc), goods with price tag,
a chart showing prices of goods at different periods.
Inflation and Deflation - 2023
BUILDING BACKGROUND/CONNECTION TO PRIOR KNOWLEDGE: the teacher ask student the amount
And how the price they do buy foodstuffs and other daily commodities between now and previous years.

CONTENT/Summary of CONTENT:

INFLATION
Inflation- is a persistent rise in the general level of price of goods and services. Inflation occurs when
there is an increase in money supply without corresponding increase in volume of
production.
TYPES OF INFLATION
1. Demand – Pull Inflation
2. Cost – Push Inflation
3. Hyper-Inflation
4. Creeping Inflation
1. Demand – Pull Inflation – This occurs when there is excess demand for goods and services over
the supply. The factors responsible for this type of inflation may be due to population increase,
increase in workers’ salaries and wages, etc.
2. Cost – push Inflation – Producers pay for factors of production, any slight increase in price of
factor input will reflect in the price per unit. For example: if there is an increase in price of flour,
sugar, butter, automatically the price of bread would be high.
3. Hyper- Inflation – This occurs when the prices of goods and services are rising fast to the extent
that money is losing its value or its ability to buy goods. War, budget deficits, etc are the major
causes of hyper inflation. Hyper inflation is also known as – galloping inflation or run away
inflation.
4. Creeping Inflation – This type of inflation occurs when there is slow but steady rise in the
general prices of goods and services. It is also known as persistent inflation
CAUSES OF INFLATION
i. Inflation occurs when there is excess demand for goods and services e.g. demand pull
inflation.
ii. Low productivity e.g. agriculture;
 iii. Increase in salaries and wages.
iv. High cost of production.
v. Budget deficit i.e. when government expenditure is more than its income.
vi. Inflation can also be caused if there is increase in population that will force demand to rise.
vii. Excessive bank lending.
viii. High cost of importing raw material can lead to high cost of goods.
ix. Hoarding – which is an act of creating artificial scarcity.
x. Inflation can be caused due to industrial action by workers e.g. strike, tools down etc.
xi. Poor storage facilities.
xii. Money laundering – which is mass transfer and injection of money into circulation.
EFFECTS OF INFLATION
Inflation as a phenomenon is a necessary evil. In other word, it has positive and negative effects in the
overall economy.
POSITIVE EFFECTS OF INFLATION
1. During inflation, the debtor gains at the expense of the creditor.
2. Inflation period serves as a period where businessmen make profit.
3. Inflation stimulates investment.
4. Employment rate is high during inflation.
5. Due to the second, third and fourth points stated above, inflation helps the economy to grow.
NEGATIVE EFFECTS OF INFLATION
1. The lenders (creditors) incur loss because the money loses its value as inflation persists.
2. Distortion in the economy due to agitation for increase in wages and salaries.
3. Fixed income earners e.g. salary earners suffer a lot during inflation.
4. Money loses its value during inflation.
5. It leads to balance of payment problems.
6. Inflation discourages savings since money loses its value day in day out.
7. Fall in living standard of the people.
HOW TO CONTROL INFLATION
1. In an attempt to stem inflation, the government should encourage industrialization to make goods
and services available.
2. Where inflation is triggered by increase in money supply, effective interest rate could be adopted
i.e. increasing the interest rate to discourage excess borrowing.
3. Effective use of fiscal policy e.g. Taxation as a way of reducing the disposable income of workers
can help to check inflation.
4. Removal of bottlenecks in the distribution system. This will enhance free flow of goods.
5. Legislation could be put in place to check the activities of hoarders.
6. Contractionary monetary policy can also help to check inflation where inflation is caused by
increase in money supply.
7. Subsidies – for farmers, business, will help in solving the problem of increase in the prices of
inputs e.g. hoe, cutlass.
8. Wage freezing i.e. government should not increase salaries.
TERMINOLOGIES ASSOCIATED WITH INFLATION
1. INFLATION GAP – This is an economic situation in which the total demand in the economy
exceeds the total supply of goods and services available to satisfy demand. To arrive at this,
subtract the total amount of money available for spending from the total money value of the actual
good and services available to meet the demand.
2. INFLATION SPIRAL – An increase in price will make workers to demand for an increase
income (wages and salaries). This will cause a rise in general level of price. This is known as
inflation spiral.
3. DISINFLATION – The direct control of consumer’s expenditure as a way of checking inflation
is known as disinflation. This is done by reducing the supply of money and increasing interest
rates etc.
4. REFLATION – This refers to economic state of affairs in which prices, employment, output etc.
is picking up again as a result of conscious government policy to that effect.
5. STAGFLATION – When high rate of inflation exists at the same time as industrial production is
slowing down, then we refer to this as stagflation.
6. SLUMPFLATION: Slumpflation occurs when economic condition in which much reduced
economic activity co-exists with inflation.
STRATEGIES & ACTIVITIES: Critical thinking, communication and problem solving method
Activity 1: The teacher writes the topic, key vocabulary words and shares the objectives with the
students.

Activity 2: Students watched video clips showing the effects of inflation.

Activity 3: Whole class discussion on how inflation rate can be reduced in the country.

Activity 5: Students takes down notes on the topic and are evaluated accordingly.

ASSESSMENT (EVALUATION): the teacher ask the students the following questions
1. What is inflation?
2. Mention four types of inflation you know.
3. State four positive effects of inflation.
4. State five causes of inflation.

WRAP-UP (CONCLUSION):
During an inflationary period, there is too much money in circulation, and too much money chases fewer goods and
services .The value of money, therefore, falls during inflation. A period of rising prices deliberately caused
by government is known as REINFLATION.

ASSIGNMENT: the teacher gives the students assignment;

1. Describe the effects of inflation on the economy of a country.

HOD/VP’S COMMENT & ENDORSEMENT: