Briefly explain Creeping and Hyper inflation.
Creeping
Inflation: Is also called as Moderate Inflation refers
to a single-digit annual increase in the general price level.
During the moderate period, the price increases persistently, but at a mild or
moderate rate, i.e. less than 10% or a single-digit inflation rate. It is the
mildest form of inflation and also known as a Mild Inflation or Low Inflation. It
is predictable inflation. According to R.P. Kent, when prices rise by
not more than (i.e. Up to) 3% per annum (year), it is called Creeping
Inflation.
If creeping
inflation continues to increase for a longer period, then it is often called Chronic or Secular Inflation. It is named chronic because if an
inflation rate continues to grow for a longer period without any downturn, then
it possibly leads to Hyperinflation.
Hyperinflation: It refers
to a situation where the prices rise at an alarmingly high rate. The prices rise
so fast that it becomes very difficult to measure its magnitude. However, in
quantitative terms, when prices rise above 1000% per annum, it is termed as
Hyperinflation. During a worst-case scenario of hyperinflation, the value of
the national currency (money) of an affected country reduces almost to zero.
Paper money becomes worthless, and people start trading either in gold and
silver or sometimes even use the old barter system of commerce. Examples
of hyperinflation include Germany in the 1920s,
Zimbabwe in the 2000s, and Venezuela in the 2010s. The last time America
experienced hyperinflation was during its civil war.
Creeping
Inflation: Is also called as Moderate Inflation refers
to a single-digit annual increase in the general price level.
During the moderate period, the price increases persistently, but at a mild or
moderate rate, i.e. less than 10% or a single-digit inflation rate. It is the
mildest form of inflation and also known as a Mild Inflation or Low Inflation. It
is predictable inflation. According to R.P. Kent, when prices rise by
not more than (i.e. Up to) 3% per annum (year), it is called Creeping
Inflation.
If creeping
inflation continues to increase for a longer period, then it is often called Chronic or Secular Inflation. It is named chronic because if an
inflation rate continues to grow for a longer period without any downturn, then
it possibly leads to Hyperinflation.
Hyperinflation: It refers to a situation where the prices rise at an alarmingly high rate. The prices rise so fast that it becomes very difficult to measure its magnitude. However, in quantitative terms, when prices rise above 1000% per annum, it is termed as Hyperinflation. During a worst-case scenario of hyperinflation, the value of the national currency (money) of an affected country reduces almost to zero. Paper money becomes worthless, and people start trading either in gold and silver or sometimes even use the old barter system of commerce. Examples of hyperinflation include Germany in the 1920s, Zimbabwe in the 2000s, and Venezuela in the 2010s. The last time America experienced hyperinflation was during its civil war.
