TIC1103B

Group 6

IMU 202
Fundamentals of Islamic Economics

Title of Group Assignment:

Current Issues in Islamic Economics: Inflation

Semester: 3
October 2024 – February 2025

Prepared By:
No. Name Student Number Class
1. NUR ARWINI BINTI MAZLAN 2023841106 TIC1103B
2. AWADAH LUTFIAH BINTI 2023811868 TIC1103B
MOHAMAD
3. NUR MAWADDAH BINTI MOHD 2023458214 TIC1103B
IZAN
4. FAIZATUL NATASHA BINTI ANUAR 2023480334 TIC1103B
5. NUR FARZANAH BINTI ABDUL 2023853314 TIC1103B
HALIL

Prepared To:
Ustazah Noor Hasyimah binti Sulaiman

Date Of Submission:
th
10 November 2024 (week 6)

Marks
Content
Introduction Arrangement/ Analysis & Discussion Conclusion Ethics References
Idea
0.
0.5 1 1.5 2 1 2 3 4 1-2 3-4 5-6 7-8 0.5 1 1.5 2 0.5 1 1.5 2 1 1.5 2
5
Total Marks /20
 Author’s Declaration

I declare that the work in this assignment was carried out following the regulations of
Universiti Teknologi MARA. It is original and is the result of my work unless otherwise
indicated or acknowledged as referenced work. I, hereby, acknowledge that I have been
supplied with the Academic Rules and Regulations for Undergraduate, Universiti
Teknologi MARA, regulating the conduct of my study and research.

No. Name Students Signature

Number
1. Nur Arwini Binti Mazlan 2023841106

2. Awadah Lutfiah Binti Mohamad 2023811868

3. Nur Mawaddah Binti Mohd Izan 2023458214

4. Faizatul Natasha Binti Anuar 2023480334

5. Nur Farzanah Binti Abdul Halil 2023853314

Faculty: Academy of Contemporary Islamic Studies (ACIS)

UiTM Cawangan Terengganu Kampus Dungun
Date : 10th November 2024

i
 Acknowledgment
First and foremost, we would like to express our deepest gratitude to our Creator, our
Lord, the Most Merciful and Most Gracious, Allah S.W.T., for making it possible for
us to complete this assignment. We thank Allah for illuminating our path, teaching us
that there is light at the end of every tunnel, and reminding us of the importance of
patience in every situation, especially during moments of doubt.

We also extend blessings and peace upon the Messenger, Prophet Muhammad (peace
be upon him), whose guidance has been a source of inspiration and a blessing in our
lives.

A verse that we will forever live by in the Holy book of Islam in the Al-Quran that says:

َ ‫ّلل بَ ٰـ ِل ُغ أَ ْم ِر ِۦه قَدْ َجعَ َل ٱ َّّللُ ِل ُك ِل‬

‫ش ْى ٍۢء قَد ًْۭرا‬ ِ َّ ‫علَى ٱ‬
َ َّ ‫ّلل فَ ُه َو َح ْسبُهۥُ إِ َّن ٱ‬ ُ ‫َويَ ْر ُز ْقهُ مِ ْن َحي‬
َ ‫ْث ََل يَ ْحتَسِبُ َو َمن يَت ََو َّك ْل‬

Meaning: And whoever puts their trust in Allah, then He’alone’ is sufficient for
them. Certainly, Allah achieves His Will. Allah has already set a destiny for everything.

We extend our heartfelt appreciation to our lecturer, Ustazah Noor Hasyimah binti
Sulaiman, for her invaluable guidance, unwavering support, and constructive feedback
throughout every stage of this assignment. Her mentorship has been essential in shaping
our project, and we are grateful for her encouragement and insights.

We would also like to thank each member of our group for their dedication, teamwork,
and resilience. Each person’s contributions, late nights, and problem-solving efforts
have brought this project to life. This accomplishment is a testament to our collective
hard work, patience, and support for one another.

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 Table of Contents

No. Contents Page Number

Author’s Declaration i

Acknowledgment ii

Table of Contents iii

1.0 Introduction 1-2

2.0 View of Inflation 2-3

2.1 Islamic 2

2.1.1 Definition 2

2.2 Conventional 3

2.2.1 Definition 3

3.0 Factors of Inflation 4

4.0 Types of Inflation From Islamic and Conventional

Perspective

4.1 Islamic

4.1.1 Inflation by its Nature

5-6
4.1.2 Inflation According to Cause
6
4.1.3 Inflation by Origin
6
4.2 Conventional

4.2.1 Demand-Pull Inflation

6-7
4.2.2 Cost-Push Inflation
7
2.2.3 Built-In Inflation
8

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5.0 Effect of Inflation from Islamic& Conventional

5.1 Islamic 9-10

5.2 Conventional 10-11

6.0 How to Solve the Inflation from Islamic and

Conventional

6.1 Islamic
12-13
6.2 Conventional
13-14

7.0 Conclusion and Recommendations 14-15

List of References 15-16

Appendices

iv
1.0 Introduction

Inflation is a problem that often occurs in every country that uses a free market
economy. This problem often occurs from the 19th century until now because of a
continuous and unlimited increase in the general price level in the economy. Inflation
is measured by the consumer price index (CPI) reflecting the annual percentage change
in the cost for the average consumer to acquire a set of goods and services that may be
fixed or changed at certain intervals, such as annually. According to R.Mc Connell
Campbell and Stanley L. Brue (n.d), it is defined as an increase in the general level of
prices, which means an increase in the general price of goods and commodities and
services over a while.

In Malaysia, inflation occurs due to several factors. Such as supply, demand, foreign
exchange fluctuations, imbalances between domestic demand and supply, and
government policies such as taxes and subsidies. Based on Malaysia Inflation Rate as
of September 2024, the inflation rate decreased to 1.80%, down from 1.90. Then, the
consumer price index (CPI), over the past decade, Malaysia's inflation rate is around
2.0% slightly below the Asia-Pacific regional average of 21%. Usually, inflation
happens when the general price level continuously rises, which can cause people to be
unable to afford essential goods. Other than that, Inflation can cause the prices of goods
to increase, leading to a rise in the cost of living and a decrease in savings because
people need to use their savings to cover living expenses. However, the positive effect
of inflation is that the unemployment rate will decrease because firms require more
labor to produce a product due to the increasing demand for the product.

Overall, Inflation is a problem that is greatly feared in every country. This is said
because inflation can negatively impact a country's economy, causing it to decline.
Therefore, various steps and methods to address this issue one of it is the government
striving to control inflation by implementing the right measures such as providing
subsidies for essential goods like cooking oil, rice, and others. Additionally, the

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 government is also working to increase domestic production by exporting rubber and
rice abroad. To sum up, the government plays an important role in preventing this
problem, and hopes that by implementing these measures, inflation can be contained,
and economy become more stable and grows in Malaysia.

2.0 View of Inflation

2.1 Islamic
2.1.1 Definition of Inflation
From the point of view of Al-Maqrizi, inflation is a natural state which has had a
negative impact on human life since the past until now. In the Islamic economic system,
inflation is not a major concern because the currencies used, such as dinar (gold) and
dirham (silver), are backed by tangible assets like gold and silver, which are stable.
While inflation can occur if the value of gold decreases, it’s rare (Mankiw, 2014). This
makes inflation less likely to be an issue compared to economies using fiat currencies.

However, inflation still has negative effects. It reduces the value of savings,
discouraging people from saving (Blanchard, 2017), and complicates financial planning
since the value of money changes over time (Friedman, 1963). Inflation also encourages
spending on non-essential goods rather than investing in productive sectors, which
harms long-term economic growth (Husain, 2018).

AIbn al-Maqrizi (1364 M – 1441 M) divides inflation into two types: Natural Inflation,
caused by changes in supply and demand, and Human Error Inflation, caused by poor
economic policies like excessive money printing (Taylor, 2000).

In conclusion, while inflation is less of a problem in Islamic economies, it still threatens

savings, investments, and economic growth. Policymakers must address inflation to
maintain economic stability (Blanchard, 2017).

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2.2 Conventional
2.2.1 Definition of Inflation
Inflation in conventional economics is defined as the continuous rise in prices of goods
and services over time. According to Mankiw (2014), inflation does not mean all prices
increase simultaneously or at the same rate. For example, rice prices may rise during a
drought but fall during harvest season. Inflation only occurs when prices increase
steadily across a broad range of goods and services over time, not from short-term price
spikes.

Blanchard (2017) emphasizes that inflation involves widespread price increases that
affect multiple sectors, such as when rising fuel prices lead to higher transportation costs
and, consequently, higher prices for other goods. Friedman (1963) argues that inflation
must involve persistent price increases, not just temporary hikes. It is a gradual, ongoing
trend rather than a one-off event.

Inflation is driven by several factors, including demand-pull inflation, cost-push

inflation, and monetary expansion. Husain (2018) explains that demand-pull inflation
happens when demand exceeds supply, while cost-push inflation occurs when
production costs rise. Monetary expansion increases the money supply, boosting
demand and driving prices up.

According to Taylor (2000), inflation varies across countries and periods, influenced by
factors such as government policies, global trade, and economic conditions. A growing
economy may see demand-pull inflation while rising production costs can lead to cost-
push inflation. Inflation can also be influenced by central banks increasing the money
supply, which lowers the value of money and raises prices.

In conclusion, inflation is a sustained increase in prices, driven by factors like demand,

production costs, and money supply. Controlling inflation is crucial for maintaining
economic stability, as emphasized by Mankiw (2014), Blanchard (2017), and others.
Policymakers must understand inflation’s causes to manage its impact effectively

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3.0 Factor of Inflation

Inflation in conventional economics typically arises from demand-pull and cost-push

factors. According to Blanchard (2017), demand-pull inflation occurs when aggregate
demand exceeds supply, causing prices to rise. This can be driven by factors such as
increased government spending or expansionary monetary policies, which lead to an
excess supply of money in the economy. Similarly, cost-push inflation, as explained by
Mankiw (2014), happens when production costs increase due to rising wages or raw
material prices forcing businesses to raise prices to maintain profit margins.

In contrast, from an Islamic economic viewpoint, inflation is closely linked to the

concept of riba (usury). Following Islamic teachings, the practice of charging high
interest rates leads to an increase in borrowing, which subsequently raises the money
supply without a corresponding increase in goods and services, thereby fueling inflation
(Salamon, 1988). Moreover, economic inequality and mismanagement also contribute
to inflation in Islamic systems. According to Husain (2018), when wealth becomes
concentrated in the hands of a few, demand for luxury goods increases, while supply
remains fixed, leading to higher prices. Furthermore, as per Husain (2018), excessive
taxation and poor economic governance, such as corruption and unbalanced money
supply, are also major contributors to inflation within Islamic economies.

In summary, although both conventional and Islamic economics recognize inflation as

a harmful economic phenomenon, their causes differ. Conventional economics
emphasizes supply-demand imbalances and the role of money supply, while Islamic
economics highlights the impact of riba, economic injustice, and mismanagement on
inflation.

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4.0 Types of Inflation from Islamic and Conventional Perspective

4.1 Islamic Perspective

4.1.1 Inflation by its Nature

According to Nopirin (1992) highlighted in the article Damayanti (2020), there are
several types of inflation which is a low rate of inflation, less than 10% annually, called
creeping inflation. Price increases happen gradually over a lengthy period in tiny
increments. Other than that, medium inflation, also known as galloping inflation, is a
relatively big price increase that accelerates over a brief period. In other words, costs
are greater this week or month than they were last week or month. Compared to creeping
inflation, the effects of medium inflation are more severe. Lastly, the most extreme kind
of inflation is high inflation (hyperinflation), which occurs when the government has a
budget deficit and must print money to make up the difference. Prices can increase three
or four times what they normally are, people lose interest in saving money, the value of
the rupiah falls, and the velocity of money increases.

4.1.2 Inflation According to Cause

According to Boediono (1995) in the article, Damayanti (2020), inflation according to

cause is classified with Inflationary Demand-Pull and Inflationary Cosh. For the
Inflationary Demand-Pull, a rise in demand, even when production is operating at
maximum capacity, is the initial cause of this inflation. Any additional demand will
only increase prices if the economy has achieved full employment. When this rise in
demand causes the GNP balance to be over or above the GNP at full employment, an
inflationary gap results. If an inflationary gap exists, inflation will occur. For
example, during a booming economy, consumer confidence is high, and people are
spending more money on goods and services. The increased demand for products like
electronics and vehicles exceeds supply, causing prices to rise.

In addition, for the Inflationary Cosh prices rising and output falling are signs of Cosh-
push inflation. As a result, a recession follows inflation, which lowers overall supply as
production costs increase. Price increases and output reductions will follow an increase

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in production. For example, a surge in oil prices can lead to higher costs across various
industries, which may increase the prices of goods and services.

4.1.3 Inflation by Origin

According to Rina Maulina, inflation by origin is classified as inflation that originates

within the country (internal inflation) and Imported inflation (external inflation).
Internal Inflation refers to results from agricultural failure, which also causes inflation
in the nation, and a budget deficit, which necessitates the creation of new money.
Agricultural failure will result in a shortage, which will drive up the cost of goods and
ultimately cause inflation. For example, in a country experiencing economic growth,
companies start to raise wages to attract and retain skilled workers. As a result,
production costs increase because businesses are paying more for labor. To maintain
their profit margins, these companies pass on the increased costs to consumers by
raising prices for goods and services. This leads to internal inflation, where the overall
price level within the country rises due to higher costs and demand.

Other than that, the following outcomes are caused by imported inflation, also known
as external inflation, which results from growing costs elsewhere:

1) The cost-of-living index is increased because of importing some current goods.

2) An increase in the price index because of rising production costs for a variety of
commodities using imported raw materials.

3) Government and private spending increases in response to rising import prices to

counteract the increase in import prices.

4.2 Conventional Perspective

4.2.1 Demand-Pull Inflation

Pull demand occurs when an economy's total demand surpasses its supply, and inflation
results. This frequently occurs when there is an excess of money in circulation, which
raises demand for products and services and drives up prices. The demand for the
resources required to manufacture products and services rises in tandem with increased
spending on these items. Their prices also rise because of the increased demand for
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production resources, such as labor and raw materials. For example,Customers may
have more money to spend if the economy is doing well. Prices may increase as a result
of this increasing demand, especially if supply cannot keep up. For example, excessive
demand may result in higher car prices if a large number of individuals purchase new
vehicles and manufacturers are unable to meet demand.

Therefore, too much money chasing too few products is what causes demand-pull
inflation, especially when the economy is running at full capacity.

4.2.2 Cost-Push Inflation

Even if overall demand is the same, decreased production or distribution might lead to
inflation. The rules of supply and demand can cause prices to increase when there are
interruptions in the flow of commodities or a decrease in production. Based on the
altered distribution patterns, this modification may potentially result in a new economic
equilibrium for the impacted products. For example,a spike in oil prices raises the cost
of manufacture and shipping for numerous items, which drives up final consumer
prices. For instance, businesses that depend on gasoline may see greater costs as a result
of rising global oil prices, which could raise the cost of consumer goods and groceries.

Among the causes of lower productivity are:

a) Technical problems at manufacturing facilities

b) Natural catastrophes

c)Bad weather circumstances

d)Raw material shortages

e)Activities that involve speculation, like hoarding

In summary, because of these problems, there are fewer items on the market. In a similar
vein, distribution issues which are frequently brought on by inadequate infrastructure
can also result in shortages.

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4.2.3 Built-In Inflation

The concept that individuals anticipate that current inflation rates will persist in the
future is known as adaptive expectations, and it is linked to built-in inflation. People
may anticipate that prices for goods and services will continue to rise at a similar rate
in the future.

Therefore, to maintain their level of living, workers may demand higher prices or
wages. The cost of goods and services rises as a result of their increasing wages, and
this wage-price spiral keeps going as one component leads to another and vice versa.
For example, companies may raise product pricing to preserve profit margins if workers
in a big industry (such as manufacturing) demand greater wages to keep up with living
expenses. Workers may then seek more pay raises as a result, which would keep the
inflation cycle going.

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5.0 Effects of Inflation from Islamic and Conventional Perspective

5.1 Islamic Perspective

5.1.1 Disruptive That Hinder People’s Motivation in Saving Money
According to Idris (2016) in the journal Anggara Windu, Shawab Nabil, Abdul Majid
M. Shabri, Harahap Isnaini (2023), research by Muslim economists, believe that impact
inflation from an Islamic perspective can cause disruption that hinders people’s
motivation in saving money. Inflation reduces the purchasing power of money, meaning
that what people save today will buy less in the future. For instance, if inflation is high,
RM100 saved now may have the purchasing power equivalent to only Rm90 next year
due to the continuous increase in the prices of goods. The perception of losing value
over time can reduce people's motivation to save money due to concerns about potential
losses in the future. Therefore, the practice of saving, which should be able to benefit
society in the future, has become a significant concern for society today.

5.1.2 Boost Spending Inclinations For Non-Primer and Expensive Items

Other than that, another impact of inflation from an Islamic perspective based on
research by Muslim economists is boosted spending inclinations, especially for non-
primer and expensive items (also known as marginal propensity to consume) (Nasution
Anriza Witi, A. M. M. S., 2023). This happens when someone who wants to preserve
wealth and avoid wasting idle money takes this productive step. Clearly, islam prohibits
the hoarding of wealth without purpose, and inflation makes it increasingly less
attractive by reducing the value of unused money over time. Inflation encourages people
to spend or invest rather than hoarding cash that is losing value, in line with Islamic
teachings to avoid wastefulness and use wealth productively. However, the worrying
thing is that this high increase in spending or investing sometimes leads individuals to
invest in unproductive places, causing them to incur greater losses in the Islamic
economy.

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5.1.3 Non-Productive Investment, that is, Hoarding Wealth
Finally, inflation also causes non-productive investments, namely the hoarding of
wealth, whereas Islam emphasizes the productive use of wealth, fair distribution, and
avoidance of harm to society. For instance, land, buildings, precious metals, and foreign
currency (Nasution Anriza Witi, A. M. M. S., 2023). It can happen when the
accumulation of unproductive assets such as real estate or metals enters the economy in
a way that generates jobs and is only used to improve living standards. This causes the
resources available for development, business, trade, and investment in public welfare
to be limited, leading to economic recession and social harm. Therefore, it is contrary
to the call of Islam to create fair economic opportunities for all communities.

5.2 Conventional Perspective

5.2.1 Decline in Community Welfare
According to Hariyanto, M. (2019), Inflation can undermine the welfare of the people
when the purchasing power of society decreases. This occurs due to the excessive
increase in the prices of goods, as well as the depreciation of the currency over time,
causing the community to be unable to purchase essential items, especially those with
low incomes. For example, staple goods such as fish, chicken, and others.

Furthermore, the increasing debt burden also disrupts the well-being of society. This
often occurs in conventional banks when loans are taken out, such as home credit or
other assets, which must be paid back at a higher price than the original due to interest
rate increases that cause the debt to become expensive. Those with low incomes will
get caught in this problem due to their insufficient income to repay debts and meet daily
needs. Therefore, it is clear that inflation can disrupt the well-being and quality of
society.

5.2.2 Income Distribution Issues

Furthermore, inflation can trigger income distribution problems (Hariyanto, M., 2019).
This occurs when fixed-income groups and creditors suffer significant losses because
their real income has decreased, while the prices of goods have risen. Consequently, the

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purchasing power of these groups declines. For example, retirees and government
employees. On the other hand, those with variable incomes benefit because their real
income has increased in line with the rise in the prices of goods, thus their purchasing
power increases. For example, property owners, traders, and debtors. Therefore, it is
clear that inflation can cause income distribution problems, subsequently disrupting an
individual's quality of life.

5.2.3 Disrupting Economic Stability

Last but not least, according to Hariyanto, M. (2019), inflation can disrupt economic
stability when purchasing power decreases. This occurs when the prices of goods
increase but the value of the currency decreases, leading to a reduction in purchasing
power. Therefore, the demand for goods decreases and an economic recession will
occur. Furthermore, this situation occurs when economic uncertainty arises, causing
investors and large companies to hesitate in making investments and expansions due to
concerns about the uncertain outcomes of future planning, and it is even unknown
whether there will be profits or losses from the investments made. Therefore, it is clear
that a lack of contribution or results from economic activities can lead to an economic
recession in the country, and economic growth will also be hindered. As a result, the
economy of this country will not be able to compete with foreign countries.

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6.0 How to Solve the Inflation from Islamic and Conventional

6.1 Solve inflation in Islamic perspective

According to Shaykh Dr Sajid Umar (2022), the way to solve inflation in the economy
from an Islamic perspective is to prohibit fractional reserve banking. The main benefit
of Islamic economics, compared to contemporary economics from a conventional
perspective, is the absence of fractional reserve banking, which would lead to negative
outcomes. Therefore, commercial banks have the legal right to extend money for loans
that carry interest. Not only that, there are ways to increase the amount of money created
within the law. Inflation has complicated economic decision making in various ways,
with this issue potentially causing economics activities to collapse. Next, the way to
avoid inflation is to prohibit the imposition of interest. One way to curb one of the
causes of inflation is by prohibiting the imposition of interest as a method to boost the
economy and potentially increase production. Another example, money borrowed to
purchase goods that are limited in the market and supply will increase. In this situation,
it is better for money to be used to increase production in the market for the people,
then ensure that money circulates in society so that the community benefits more from
this method.

Not only that, but also by promoting "supply and demand" under Islamic economics.
Referring to Islamic economics, goods and services in supply and demand refer to the
needs, demand, and supply of the community. This means the original and genuine
prices of goods without interest-based credit and improving the people with supply
chains in the market, especially basic food items. Although Islam allows a laissez-faire
approach in market regulation, it does not impose a ban on price control and supply
increase. It is taken seriously because it is related to and aims to protect the basic food
that is essential for life, such as staple foods and necessary utilities, which are in an
uncontrolled and extreme state to protect the community from being exploited and
deceived.

Paying zakat is also a way to address the problem of inflation. Paying zakat is not just
about fulfilling an obligation, but there are many benefits to be gained not only by the
recipients but also by the givers. By giving zakat in this way, it certainly directly helps
and supports those in need in the community. Not only that, but giving zakat clearly
shows that it has a positive impact, as it can lead to profits or income. Zakat can also

12
be used on selling prices to act as a disincentive for artificially raising prices, but rather
as a natural adjustment.

The institution of Awqaf, or the term derived from the Arabic word wakaf, is also one
of the ways to address the issue of inflation from an Islamic perspective. Wakaf is a
type of special charitable act for everyone forever and eternally. It involves donations
as a permanent asset that can generate returns or interest. One of the special features
and advantages of waqf is that its nature and usage are not limited compared to zakat.
Because waqf uses funds and capital to distribute the proceeds to the social community,
it provides many benefits and advantages in meeting the basic needs of the people.
Therefore, acting as a supply of staple goods or the basic supply of privatized staple
goods. It is clear that the prices set on luxury goods and specific inflation affect the
wealthy society and not the general public.

6.2 Solve inflation in Conventional Perspective

According to Satya Granha (2022), economic inflation can be addressed from a

conventional perspective. One way to address the economy is by reducing the
circulation of money supply or the velocity of money circulation, as well as increasing
the prices of goods sold. Among the measures that can be taken to address the inflation
problem is, first, monetary policy. The monetary policy is issued by the central bank
or, in other words, it controls the amount of money circulating in the community to
stabilize it. To solve the problem of inflation, monetary policy is one of the most
effective ways and makes it a primary objective to reduce the amount of money
circulating in society. In addition, there are three ways the central bank addresses the
issue of inflation. The first method is to raise interest rates so that people prefer to save,
thereby reducing the circulation of money in society to tackle inflation. The second is
open market operations, where selling securities reduces the circulation of money in
society. The third is the policy of maintaining cash reserves. It helps the ratio used to
reduce the amount given to the public.

Besides monetary policy. One other method used in the conventional perspective is
fiscal policy. Fiscal policy is a policy that has been made by the government related to
spending and revenue in the form of government taxes. Fiscal policy is implemented to
13
 address inflation by the government reducing money spending, increasing taxes on the
people, and the government holding loans by issuing government bonds. The last
method used by the conventional perspective is implementing a non-monetary basis.
This policy is made to increase output in production, stabilize wages and salaries.
However, it does not increase frequently. Not only that, it is also to control prices and
distribute goods to the community.

7.0 Conclusion

From the above discussion, it showed that inflation is a critical economic problem that
requires careful management to ensure the economy is stable and grows. In general, if
inflation happens, the country will experience various difficulties that will affect the
country's economy which can impact the government and society. Inflation can be
viewed from both Islamic and conventional perspectives which provide different
meanings.

In other terms, inflation happens because of typically arises from demand-pull and cost-
push factors that cause the cost of living to increase. Inflation is generally divided into
6 types while from an Islamic perspective, it is divided into 3 types which are inflation
by its nature, ⁠inflation according to cause, and ⁠inflation by origin. Meanwhile, from
a conventional perspective, it is also divided into 3 demand-pull inflation, ⁠cosh-push
inflation, ⁠and built-in inflation.

Besides, inflation also affects both perspectives which has a very severe impact. In
Islamic Perspective it effects disruptive that hinders people’s motivation to save money
boosts spending inclinations for non-primer and expensive items and also affects non-
productive investment that is hoarding wealth. From a Conventional perspective, it is
also detrimental decline in community welfare, income distribution issues also
disrupting economy stability when purchasing power decreased.

To sum up, inflation is an economic problem that every country inevitably experiences.
Inflation has a negative impact on a country that experiences it, which can disrupt lives.
However, inflation also has positive effects, such as creating job opportunities for the
unemployed and thereby reducing the unemployment rate in a country. All in all, the

14
government has been making various efforts to prevent this problem from occurring in
our country.

List of References

Anggara Windu, Shawab Nabil, Abdul Majid M. Shabri, Harahap Isnaini. (2023).
Economic Stability in Islamic View : Approach to Controlling Inflation.
International Journal of Science, Technology & Management, 4, 1366–1372.
Blanchard, O. (2017). Macroeconomics (7th ed.). Pearson
Chapra, M. U. (2000). The Future of Economics: An Islamic Perspective. Islamic
Foundation
Chapra, M. U. (2008). Islamic Economics: A Short History. Islamic Research and
Training Institute, IDB
Damayanti Dhea Aulia (2022), Inflation in Islamic and Conventional Economic
Perspectives, I’tisham: Journal of Islamic Law and Economics Vol. 2 No. 2
Juli - December 2022
Friedman, M. (1963). Inflation: Causes and Consequences. Economic Sciences Press
Hassan, M. K. (2012). Islamic Banking and Finance: Recent Developments in Theory
and Practice. Palgrave Macmillan
Hariyanto, M. (2019). Perspektif Inflasi Dalam Ekonomi Islam. Jurnal Ekonomi
Syariah, 2, 79–95.
Husain, I. (2018). Macroeconomics: Theory and Policy. McGraw-Hill
Iqbal, M., & Mirakhor, A. (2007). An Introduction to Islamic Finance: Theory and
Practice. John Wiley & Sons
Ibn al-Maqrizi, T. A. (1987). Al-Maqrizi’s Treatise on Monetary History and the Impact
of Inflation in the Islamic World. Cairo: Dar Al-Ma'arifah
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 Appendices

Appendix 1: Malaysia Newspaper “ Inflasi Sifar Sasaran Kita”

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Appendix 2: Poster “Malaysian’s Inflation in August 2024 Moderate to 1.9%”

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Appendix 3: Poster “How Does Inflation Work”

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 Appendix 4: Malaysia’s Inflation Report
Source: The Star, “Malaysia’s Inflation Rises to 3.3% in 2022,”
17 May 2023, 2:46 PM

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Appendix 5: Summary of Similarities

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Appendix 6: AI Similarities

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