In this study a theoretical model is developed by incorporating rent seeking activities in standard Real Business Cycle (RBC) model with money in utility function, to examine the affect of these activities on total factor productivity and inflation in economy. Empirically the study is conducted for Economy of Pakistan by taking time series data from 1983- 2010. Rent seeking index is generated by using data from International Country Risk Guide (ICRG) dataset. Autoregressive Distributive Lag (ARDL) technique is used for estimation .The results estimate, supports the argument that controlling rent seeking activities result in increasing total factor productivity and decreasing inflation. Supervisor:- Dr. Musleh ud Din