ABSTRACT

This research work is handy in the study of current inflation and economic activities in Nigeria.  The inflationary hypothesis aims at finding out if there is any adequate  control of inflation in relation to economic activities in Nigeria.

In this project we discuss the scopes definition of term and  limitation. We also discuss the definition of inflation and the effect of inflation.

The review base in theories and how monetarists maintain that inflation cause by an increase in money supply it also said that monetarist theory is predicated on the assumption that there is full employment of resources and in the classical equation of exchange  (Mv-Pt) there is constant velocity of circulation of money (v) their conclusion is that the arte of inflation can be reduces by controlling of money supply in an economy.

In recommendation the stability in the general prices level. For instance prices giving should be avoided as much as possible.  It also recommend that government should moderate  the rate of inflation & should be reverse of those used to encourage full employment.

CHAPTER ONE INTRODUCTION

1.1BACKGROUND

Inflation can be defined as the persistent or continuous increase in the general price level Mr. Thoney Croft former chancellor of the exchequer (minister of finance)  focuses   defined inflation “too much money chasing few goods” for about three decades now, inflation is a hydro-head problem that is so difficult to eliminate in Nigeria. Infact it has been a topic  of major debate among economist in Nigeria and elsewhere.

Inflation is now a universal phenomenon on both in the developed and less developed countries.  There is a rapid and persistent rise in the cost of living and inflationary pressure now pose the greatest danger to economic growth and development.  In Nigeria the economic sector has been worst affected by the scourge of inflation.

On the other hand, some argued and empirically demonstrated that inflation stimulates investment and growth (Keynessa and Osakwe) 1936:1982) they see inflation as a natural consequence of economic development and that much price increase are necessary for economic growth especially in developing countries.

Therefore, since the real relationship  between real output and inflation is controversial the primary aim of this paper is to examine the relationship statistically using recent data in Nigeria.

Bearing in mind the effect of inflation and its implication in our economy, it became necessary to study the exact relationship between inflation and economic activities in Nigeria.     

1.2STATEMENT OF THE PROBLEM

As stated in the previous section, this relationship between inflation and real output is controversial.  The effects of inflation in the economy is infact unknown while some economist believe that inflation reduces the level of real output in Nigeria distorts expectation and so on.  Other economists argue that inflation stimulate investment and growth. It is based on this controversy that the study seek to highlight statistically the relationship between inflationary experience and economic growth in Nigeria.   

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