Inflation


What is Inflation ?
 
Increase in general price level is called Inflation. 

Types of Inflation : 
  1. Creeping Inflation : The level of increasing price is very slow. so it is also called as the snail or creeper inflation. The rate of change of price would be around 3 % . There is nothing to worry about this inflation , it is considered as helathy inflation.
  2. Walking Inflation : The rate of change of price level would be around 3 to 10 %. This infaltion is warning. The Government should take serious plans to control this inflation.
  3. Running Infaltion : The rate of change of price level would be around 10 to 20 % . It will effect the economy very badly.
  4. Hyper Infaltion : The change of price level is very rapid and rate of change is around 20 to 110 % . Every product will be very costly. It is the worst sitution for the economy.
  5. Headline Inflation : It is the measure of total inflation within  an economy. It includes price rise in food , fuel and all other commodities.
  6. Core Inflation : It is measures  changes in price level of goods but it does not consider the inflation in food and fuel.
 Types of Inflation based on reasons for inflation :

1) Demand pull Inflation : let us consider a situation that , if many people wanted to buy the same product, what will the seller do ? of course he will increase the price of the product. when the price of the product is increased because of the demand it is called as Demand Pull Inflation.

2) Cost Push Inflation : Let us consider that prices of the fuel went up . Because of this what happens ? Transportation cost for product to reach market increases . So the manufacturer increases the price of the product. Here increase in the cost of production increased the cost of the product. So it is called as Cost Push Inflation.


Causes of Inflation :


Demand pull factors : 

  • Black Money
  • Increase in Population
  • Rise in Income
Cost Push factors :

  • Rise in Minimum Support price
  • Rise in Indirect Taxes
  • Hoarding and black Marketing
We will see Measurement of Inflation in Next part.