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Inflation BY AYUSSH SANGHI Types of Inflation - Part 4.3
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Inflation can be divided in Types Inflation can be divided in types on the following basis: Cause Based Inflation Rate Based Inflation
Rate Based Inflation Through this lesson we would understand the various types of inflation on the basis of cause: . Demand Pull Inflation Cost Push Inflation . Pricing Power Inflation Sectoral Inflation
Sectoral Inflation It takes place when there is an increase in the price of the goods and services produced bv a certain sector of industries. Example: An increase in the cost of crude oil would directly affect all the sectors that use crude as an input. Thus, the increasing price of fuel has become an important issue related to the economy all over the world.
Example Increment in Airfare In Aviation industry when the price of oil increases, the ticket fares also go up.
Creeping Inflation . It occurs when the inflation rate is in the range of 1% to 5%. Such inflation erodes the purchasing power of money, but is referred to as manageable and sometimes inevitable in a growing economy
Trotting Inflation . It lies in the range of 5% to 10%, which is higher than Creeping Inflation. If Creeping Inflation is not looked at the economists then it may lead to Trotting Inflation.
Hvper Inflation It is the extremely rapid escalation of prices (can be more than 50% per month) for goods and services. The most famous hyperinflation of the modern era occurred in Germany in 1920-1923 when the government began printing money to make up for revenue lost. The German hyperinflation resulted in a percentage increase in prices in the millions per month
Hvper Inflation Other cases of hyperinflation (Greece, Hungary) following World War II were even more extreme. The root cause of hyperinflation tends to be the excessive printing of currency by the monetary authority Hyperinflation is extremely disruptive by making savings worthless very quickly, thus encouraging workers to spend money as fast as it is earned.