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Managerial Economics - Inflation

Types Of Inflation On The Basis Of Speed

   Posted On :  29.05.2018 11:39 pm

The major four types of inflation is depicted graphically in the following graph.

Types Of Inflation On The Basis Of Speed:
 
1.      Creeping inflation: the inflationary rate is less than 2% that means prices are increasing gradually.
 
2.      Walking inflation: the inflationary rate of a country is around 5% little more than creeping.
 
3.      Running inflation: the rate of growth in prices are more i.e. the inflation is growing at the rate of 10%.
 
4.      Galloping inflation: higher growth rate compared to the earlier stages i.e. the change is around 25%.
 
The major four types of inflation is depicted graphically in the following graph. ‘X’ axis denotes the year and ‘Y’ axis for rise in price level. Based on the elasticity and slope we can understand over a period of time sustainable inflationary situation leads to higher level of inflation in the economy.


On The Basis Of Inducement:


1.      Deficit induced: the deficit in the balance of payments of the country or fiscal deficit is the reasons for inflation. The value of the currency is falling due to the above mentioned reasons.
2.      Wage induced: due to higher wages and salaries the money supply in the country increases leading to inflation.
3.      Profit induced: higher the profit the organizations earn, they tend to share with their stakeholders which induces the money supply and reduces the value of money.
4.      Scarcity induced: the raw material and other input factor scarcity (for example petrol) may induce the price hike in the market.
5.      Currency induced: the value of currency fluctuates due to various internal and external forces.
6.      Sectoral inflation: a particular sector of a country may be the reason for economic growth or money supply. (for example in India the growth in service sector particularly IT)
7.      Foreign trade induced: if the country has unfavorable balance of payments, that means the country’s exports are less than the imports, then we need more of foreign currency to make payments to the exporters ultimately this increases the demand for other currencies in the market.
8.      War time, Post war, Peace time: During war period the government expenditure on various amenities will induce the inflation and the production, availability of the commodities will be low which leads to price hike. To settle down the economy after war or natural calamities the government spending will be more.

On the basis of extent of coverage:

 
Based on the coverage, economists classify the inflation as open and repressed; Comprehensive and sporadic.

 

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