Types of Inflation
Inflation depending on its rate of price rise is categorized as follows.
Creeping Inflation
Price rise at a very slow rate like that of a snail or a creeper is called creeping inflation. This amount of inflation is necessary for economic growth i.e., to keep the economic cycle healthy and running.
Moderate inflation, Walking or Trotting Inflation
Moderate inflation can be differently defined around the world, given the different inflation histories. As an indication only, one could consider an inflation as moderate when it ranges below 10%. Inflation crossing this range might have very negative effects on the economy.
Running Inflation
An inflation exceeding 10% but below 20% may be considered as a running inflation.
Hyper Inflation or Galloping or Runaway Inflation
Definition of hyper inflation. This is generally considered to occur when inflation is greater than 1000%. With hyper inflation money loses its value so rapidly that nobody wants to use it as a medium of exchange
Eg: In 1920s Germany had inflation of 100 billion percent, and in 1946 Hungary had inflation of 42,000 billion per cent.
Inflation based on the causes, are as follows
Demand-pull inflation
Demand-pull inflation results from strong consumer demand. Many individuals purchasing the same good will cause the price to increase, and when such an event happens to a whole economy for all types of goods, it is called demand-pull inflation.
Cost-push Inflation
Cost-push inflation develops because the higher costs of production factors decreases in aggregate supply (the amount of total production) in the economy. Because there are fewer goods being produced (supply weakens) and demand for these goods remains consistent, the prices of finished goods increase (inflation).
Structural Inflation
Inflation caused by deficiencies in certain conditions in the economy such as a backward agricultural sector that is unable to respond to people's increased demand for food, inefficient distribution and storage facilities leading to artificial shortages of goods, and production of some goods controlled by some people. Food inflation as the preference for protein foods is far ahead of its supplies and this is a phenomenon driven by income rise. Pulses production is unable to respond in accordance with the increase in demand.