As the nature of inflation is not uniform in an economy for all the time, it is wise to distinguish between different types of inflation. Such analysis is useful to study. There are different types of inflations like Creeping Inflation,Galloping Inflation, Hyperinflation, Stagflation, Deflation. There are different types inflation which are explained below: Creeping Inflation: This is also known as mild inflation or moderate inflation. Inflation means a sustained increase in the general price level. However, this increase in the cost of living can be caused by different factors. The main two types What are the different types of inflation in India?
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This helped cause rising nominal wages; this was a significant factor in causing inflation of the s. Imported Inflation A depreciation in the exchange rate will make imports more expensive.
What are the different types of Inflation?
Therefore, the prices will increase solely due to this exchange rate effect. A depreciation will also make exports more competitive so will increase demand.
Temporary Factors The inflation rate can also increase due to temporary factors such as increasing indirect taxes. If different types of inflation increase VAT rate from And, rising prices again prompt trade unions to demand higher wages. Thus, an inflationary wage-price spiral starts.
This causes aggregate supply curve to shift leftward. Different types of inflation can be demonstrated graphically where AS1 is the initial aggregate supply curve.
Now there is a leftward shift of aggregate supply curve to AS2. With no change in aggregate demand, this causes price level to rise to OP2 and output to fall to OY2.
One of the important causes of price rise is the rise in price of raw materials. Firms buy these inputs now at a higher price.
Understand the Different Types of Inflation
Not only this, CPI is often imported from outside the economy. Again, CPI may be induced by wage-push inflation or profit-push inflation. Fiscal policy changes, such as increase in tax rates also leads different types of inflation an upward pressure in cost of production.
Finally, production setbacks may result in decreases in output.
Inflation: Types, Causes and Effects (With Diagram)
In the midst of this output reduction, artificial scarcity of any goods created by traders and hoarders just simply ignite the situation. Inefficiency, corruption, mismanagement of the economy may also be the other reasons.
Thus, inflation is caused by the interplay of various factors. A particular factor cannot be held responsible for any different types of inflation price rise.
When different types of inflation act as buyers they want prices of goods and services to remain stable but as sellers they expect the prices of goods and services should go up. In other words, inflation may be unanticipated when people fail to adjust completely.
This creates various problems. Thus, it redistributes income and wealth.
Borrowers gain and lenders lose during inflation because debts are fixed in rupee terms. When debts are repaid their real value declines by the price level increase and, hence, creditors lose.
An different types of inflation may be interested in buying a house by taking loan of Rs. However, if in an inflation-ridden economy creditors chronically loose, it is wise not to advance loans or to shut down business.
What Is Inflation?
Never does it happen. Negative Inflation Also known as deflationnegative inflation occurs when prices drop for various reasons.
Having a smaller money supply increases the value of money, which different types of inflation turn decreases prices. A reduction in demand either because there is too large of a supply or a reduction in consumer spending can also cause negative inflation.