Types of inflation

Types of inflation in term of reasons

There are two famous types of inflation i.e. demand Pull & cost push inflation. However, inflation can also be categorized in term of pace of rising prices i.e. creeping inflation, walking inflation, running inflation, hyper inflation.

1.    Demand Pull Inflation

Demand pull inflation is a situation, where demand of goods is raised at the level of full employment, and this situation will create demand pull inflation. Because at full employment level the supply is constant and in fact full employment level is represented by the horizontal supply curve.

2.    Cost push inflation

Price may rise due to rise in production cost. It is obvious that producer would sell good price at higher prices in case of high production cost. In this type of inflation on one hand prices are rising and on other hand unemployment rate in increasing due to cut down in supply due to high production cost.

Types of inflation (in Terms of Pace of rising prices)

1.    Creeping Inflation Definition

Creeping inflation is that form of inflation in which prices increases at slow pace. In general the inflation below 3% is known as creeping inflation. Economist regards creeping inflation safe for the economy. Creeping inflation is essential for growth of economy and economy will be stagnant in absence of creeping inflation.

2.    Walking Inflation Definition

Walking inflation is moderate rise in price level. Inflation rate between 3% to 7% is regarded as walking inflation. This range can be extended to 10%, therefore safely we can say that inflation between 3 to 10 are walking inflation. Walking inflation is regarded as warning signal for controlling measures.  If control measures are not adopted then inflation will turn into running phase (rapid rise in prices).

3.    Running inflation Definition

Running inflation is a stage of inflation where general price level i.e. inflation rises at rapidly. Economist considered inflation between 10% - 20% as running inflation. If inflation is not controlled in this stage, then next stage is hyperinflation which is considered to disaster for economy.

4.    Hyper inflation Definition

Hyper inflation is very high level of inflation i.e. prices are rising at a rate above than 20%. In hyper inflation prices are increasing on daily bases and speculation in the market at peak. Hyper inflation other name are Galloping or runaway inflation