Q.State the types of inflation.

Inflation, a sustained rise in the general price level, is of several types: by speed it is creeping, walking, running or galloping (hyper) inflation; by cause it is demand-pull or cost-push inflation; and by degree of control it is open or suppressed inflation.

Meaning

Inflation is a situation in which the general price level rises persistently over a period of time, so that the value of money falls. The types of inflation can be grouped on three bases.

Types of inflation

A. On the basis of rate (speed) of rise in prices:

• Creeping inflation: A very slow rise in prices, around 2 to 3 per cent a year, generally considered mild and even helpful to growth.
• Walking inflation: A somewhat faster rise, around 3 to 10 per cent a year, which is a warning signal.
• Running inflation: A rapid rise of around 10 to 20 per cent a year that hurts the economy.
• Galloping or hyperinflation: A very steep and uncontrolled rise in prices, where money rapidly loses value, as happened in Germany after the First World War.

B. On the basis of cause:

• Demand-pull inflation: Prices rise because aggregate demand exceeds aggregate supply at full employment — too much money chasing too few goods.
• Cost-push inflation: Prices rise because the cost of production increases, for example due to higher wages or higher prices of raw materials. …