Question

Write the types of inflation.

Answer 1

• The four types of inflation are –

1. Creeping Inflation:
Creeping inflation is slow-moving and very mild. The rise in prices will not be perceptible but spread over a long period. This type of inflation is in no way dangerous to the economy. This is also known as mild inflation or moderate inflation.

2. Walking Inflation:
When prices rise moderately and the annual inflation rate is a single digit. (3% – 9%), it is called walking or trolling inflation.

3. Running Inflation:
When prices rise rapidly like the running of a horse at a rate of speed of 10% – 20% per annum, it is called running inflation.

4. Galloping inflation:
Galloping inflation or hyper inflation points out to unmanageably high inflation rates that run into two or three digits. By high inflation, the percentage of the same is almost 20%
to 100% from an overall perspective.

• Other types of inflation (on the basis of inducement):

1. Currency inflation:
The excess supply of money in circulation causes a rise in the price level.

2. Credit inflation:
When banks are liberal in lending credit, the money supply increases and thereby rising prices.

3. Deficit induced inflation:
The deficit budget is generally financed through the printing of currency by the Central Bank. As a result, prices rise.

4. Profit induced inflation:
When the firms aim at a higher profit, they fix the price with a higher margin. So prices go up.

5. Scarcity induced inflation:
Scarcity of goods happens either due to a fall in production (e.g. farm goods) or due to hoarding and black marketing. This also pushes up the price. (This has happened in Venezuela in the year 2018).

6. Tax induced inflation:
An increase in indirect taxes like excise duty, customs duty, and sales tax may lead to rising in price (e.g. petrol and diesel). This is also called taxflation.