INFLATION

•Meaning
•Types of inflation
•Effects of inflation
 MEANING :-
 A situation of sustain increase in the general
price level in an economy.
 It means an increase in the cost of living as the
prices of good and services increases.
  Inflation reflects a reduction in the 
purchasing power per unit of money – a loss of 
real value in the medium of exchange and unit of
account within the economy.
 TYPES OF INFLATION
ON THE BASIS OF SPEED OR INTENCITY

1.Creeping or mild inflation : If the speed is of upward rise in price is slow and small than it is called creeping inflation.
• Annual price rise varies between 2% to 3%.
• This level is considered to be helpful for economic growth and development.

2.Walking inflation : Annual price increases lies between 3% to 4%.

• Normally one digit inflation rate is called Moderate inflation which is not only predictable but also keep peoples faith on the monetary
system of the country.
3.Galloping or hyper inflation : Walking inflation may convert into galloping inflation.
• Dangerous for economic growth and development .
• Extreme form of inflation when an economy gets shatered.
• Inflation in the duoble or triple digit range of 20 hundred or 200 hundred percent is labelled as galloping inflation.
• On the basis of causes

1. Demand pull inflation : An increase in aggregate demand over the

available output leads to arise in price level. Such inflation is called
DEMAND PULL INFLATION(DPI). Classical economist attribute the rise
in aggregate demand to money supply that is if money supply in an
economy exceeds the available goods and services DPI appears.
Keynesians economist argue that there can be an autonomous increase in
aggregate demand and investment or government spending a tax cut or a
net increase in money supply . This would prompt upward adjustment in
price .