State the types of inflation.
The types of inflation on the basis of Rate:
1. Moderate Inflation: it is also called as Creeping 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
predictable inflation.
2. Galloping Inflation: The inflation is in double or
triple digit and is reflected in the high price of goods and services,
i.e. prices increase manifold. The double-digit inflation varies from 10% to
999% per annum and there is a great difference between these two limits.
3. Hyper Inflation: As the name suggests, the hyper
inflation is the situation when the prices rise at an alarmingly high rate,
i.e. more than a three-digit per annum. The prices rising above
1000% per annum marks the beginning of hyper inflation.
Types of Inflation on the Basis of Cause
1. Demand-pull Inflation: The demand-pull inflation exists when
the aggregate demand increases rapidly than the aggregate supply.
2. Cost-Push Inflation: The Cost-Push inflation occurs when the
cost of raw material, labor, and inputs necessary for the production of final
goods increases. Such inflation is often caused by the monopolistic groups of
the society such as labor unions and firms in the monopoly and oligopolistic
market setting.
Strong labor unions force the wage-price to go up that
leads to an increase in the price of goods and services. This rise in the price
level is called as wage-push inflation.
Also, the firms enjoying the monopoly in the market raise
the price level to increase their profit margins due to which the general price
level increases. This is called as profit-push inflation.
Another kind of cost-push inflation is the supply-shock
inflation when the firms restrict the aggregate supply of goods and
services.
The types of inflation on the basis of Rate:
1. Moderate Inflation: it is also called as Creeping 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 predictable inflation.
2. Galloping Inflation: The inflation is in double or triple digit and is reflected in the high price of goods and services, i.e. prices increase manifold. The double-digit inflation varies from 10% to 999% per annum and there is a great difference between these two limits.
3. Hyper Inflation: As the name suggests, the hyper inflation is the situation when the prices rise at an alarmingly high rate, i.e. more than a three-digit per annum. The prices rising above 1000% per annum marks the beginning of hyper inflation.
Types of Inflation on the Basis of Cause
1. Demand-pull Inflation: The demand-pull inflation exists when the aggregate demand increases rapidly than the aggregate supply.
2. Cost-Push Inflation: The Cost-Push inflation occurs when the cost of raw material, labor, and inputs necessary for the production of final goods increases. Such inflation is often caused by the monopolistic groups of the society such as labor unions and firms in the monopoly and oligopolistic market setting.
Strong labor unions force the wage-price to go up that leads to an increase in the price of goods and services. This rise in the price level is called as wage-push inflation.
Also, the firms enjoying the monopoly in the market raise the price level to increase their profit margins due to which the general price level increases. This is called as profit-push inflation.
Another kind of cost-push inflation is the supply-shock inflation when the firms restrict the aggregate supply of goods and services.
