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.
Tags : Managerial Economics - Inflation
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