Question

Distinguish between running inflation and hyper inflation.

Answer 1

1) When the prices rise rapidly to more than 10 percent per annum (generally between 10% & 20% ), its called as running inflation, its called as running inflation in the sense that prices are running like a horse. Running inflation is an indication that strong monetary & fiscal measures are needed, otherwise the inflation may rise further to a more serious situation called as hyperinflation.

2) Hyperinflation or galloping inflation occurs when the price rises between 20% to 100% per annum & even more. Hyperinflation is more serious situation & leads to the collapse of an economy because the purchasing power of money falls continuously.