Inflation and its Kinds

 

Introduction

 

It represents the rise in general price level. Basically when the state bank of the country issue the over demanded notes then it decrease the value of money. Meanwhile raises the general price level in the market.

 

Some authors define the inflation as follows By

 

J.M.Keynes

 

“Inflation is a rise in price level after the full employment has been achieved”

 

By R.P Kent

 

“Inflation is nothing more than a sharp upward movement in the price level”

 

By Crowther

 

“In the state of Inflation the prices are raising, i.e. the value of money is falling”

 

On the basis of causes

 

1.    Demand pull Inflation

 

In which inflation arises due to increase in demand of goods. On the other hand supply of the goods not according to demand of consumers at the result price level increase of existing goods, this situation creates the inflation in the market.

 

2.    Cost push Inflation

 

When the cost of production increase and producer raise the price level in the market, it’s called cost push inflation. During the manufacturing process, increase the ost of Factor of Production show the high cost of production, at the result producer reduce the supply of goods due to lesser profit ratio, the general price level increased.

 

 

3.    Budgetary Inflation

 

When the Govt. of the country borrows from banks or prints new currency notes cover the budget deficit. After it quantity of money increase in the market, which tends the falling the value of money as we as increase the price level in the market. These situations create the inflation.

 

 

4.    Profit induced inflation

 

When the monopolist earns the more profits on goods produced. It creates the profit induced inflation. In which basically producer raise the price level as per its wants, at the result price level increase, also becoming inflation.

 

5.    Food inflation

 

When the prices of foods items increase sharply, it is as food inflation. Just like during the days of Eid, Ramzan etc

 

6.    Income inflation

 

The inflation that occurs from high income level. Income may increase due to change in salary or foreign remittance.

 

7.    Monetary inflation

 

This inflation arises due the increase in supply of money with no increase in production is called monetary inflation.

On the basis of rate of inflation

 

1.    Creeping inflation

 

In which when the price level of goods raises at slow rate over a period of time. It also called mild inflation. The rate of inflation may be upto 2% P.A. this types of inflation faced by Japan, USA, and Singapore.

 

2.    Walking inflation

 

In walking as the word represent, price level increase in continuous form with fast speed as compare to creeping inflation. The rate of inflation around 5% annually.

 

3.    Running inflation

 

In which general price level near about 8% to 10% annually is called running inflation.

 

4.    Trotting inflation

 

In trotting inflation price level rise with double digit i.e. 20% annually. Some authors say about percentage 5% to 20% annually. Pakistan faced the trotting inflation during 1970-80 and 1990-2000.

 

5.    Galloping inflation

 

When the rate of inflation across the limit of 20% per annum. Then galloping inflation arrived. Maximum limit of galloping inflation is 1000% P.A. during 1980-93 Argentina faced such inflation with the rate of 423.4% p.a.

 

6.    Hyper inflation

 

When the rate of inflation is more than 1000% p.a. we can say it’s a final stage of inflation. In Poland the rate of inflation was more than 1000% in 1898. Germany also experienced with hyper inflation during 1922-24.

 

On the basis of degree of control

 

1.    Open inflation

 

When inflation get out of control of the Govt. in which all measurement and polices are failed to control the price level as well as inflation in the market.

 

 

2.    Suppressed inflation

 

If the Government can control over the inflation is called suppress inflation. But on the other hand some other problems are created like hoarding, corruption, and black money.

 

Other types

 

1.    Partial inflation

 

According to J.M, Keynes, partial inflation occurs when the price level rises partly due to an increase in the cost of production on goods and partly due to rise in supply of money provided the economy is operating below the level of full employment.

 

 

2.    Full inflation

 

When in economy General Price level rise due to full employment in the market, because when consu er got the jobs, then they demand more for the purpose f satisfaction, but due to lesser supply of goods price of goods rise and inflation occurs.

 

 

Conclusion

 

As we know inflation very harmful condition for consumers of the economy. Especially for the poor’s, Govt should develop the polices for control over inflation with implementation. Because it required 5 to 10 years to removing the inflation from the economy.

 

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