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Types of Inflation

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  • Types of Inflation

    There are four main types of inflation. The various types of inflation are briefed below.

    Wage Inflation: Wage inflation is also called as demand-pull or excess demand inflation. This type of inflation occurs when total demand for goods and services in an economy exceeds the supply of the same. When the supply is less, the prices of these goods and services would rise, leading to a situation called as demand-pull inflation. This type of inflation affects the market economy adversely during the wartime.

    Cost-push Inflation: As the name suggests, if there is increase in the cost of production of goods and services, there is likely to be a forceful increase in the prices of finished goods and services. For instance, a rise in the wages of laborers would raise the unit costs of production and this would lead to rise in prices for the related end product. This type of inflation may or may not occur in conjunction with demand-pull inflation.

    Pricing Power Inflation: Pricing power inflation is more often called as administered price inflation. This type of inflation occurs when the business houses and industries decide to increase the price of their respective goods and services to increase their profit margins. A point noteworthy is pricing power inflation does not occur at the time of financial crises and economic depression, or when there is a downturn in the economy. This type of inflation is also called as oligopolistic inflation because oligopolies have the power of pricing their goods and services.

    Sectoral Inflation: This is the fourth major type of inflation. The sectoral inflation takes place when there is an increase in the price of the goods and services produced by a certain sector of industries. For instance, an increase in the cost of crude oil would directly affect all the other sectors, which are directly related to the oil industry. Thus, the ever-increasing price of fuel has become an important issue related to the economy all over the world. Take the example of aviation industry. When the price of oil increases, the ticket fares would also go up.
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  • #2
    Re: Types of Inflation

    There are different degrees of inflation. It includes mild inflation, strato-inflation and hyper-inflation.

    Mild inflation is a slow rise in price level of no more than 5 percent per annum. It is associated with a low level of unemployment and is during the upswing phase of a trade cycle. Such creeping inflation has beneficial effects on an economy. It is a sign of a buoyant economy or an expanding economy, implying the generation of jobs, output and growth.

    For strato-inflation, the inflation rate ranges from about 10 percent to several hundred per cent. Many developing countries particularly those in Latin America experienced this.

    Hyper-inflation is a very rapidly accelerating inflation which is also know as runaway inflation or galloping inflation. This usually leads to the breakdown of the country's monetary system as the existing currency may have to be withdrawn and a new one introduced. In 1923, the inflation rate in Germany averaged 322 percent per month with the highest inflation rate at 29 000 percent in October. Hyper-inflation usually occurs during or soon after a war when a government turns to the printing press to create money to pay its debts. It is usually short-lived and should not be regarded as typical of inflation.
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    • #3
      Re: Types of Inflation

      Thank you for explaining the basics in silence for calculating inflation. Seriously guys its a big problem that affects the economy of many developing countries.Thanks for aware for me the inflation.
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      • #4
        Re: Types of Inflation

        When there is a rise in general price level for all goods and services it is known as inflation.There are four types of inflation ;
        1.Wage Inflation
        2.Cost-push Inflation
        3.Pricing Power Inflation
        4.Sectoral Inflation
        Some other type of Inflation are explained below:
        5..Fiscal Inflation: Fiscal Inflation occurs when there is excess government spending. This occurs when there is a deficit budget.
        6.Hyperinflation: Hyperinflation is also known as runaway inflation or galloping inflation. This type of inflation occurs during or soon after a war.




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        • #5
          Re: Types of Inflation

          From http://www.thegoldstandardnow.org/history


          What the Gold Standard Is


          The classical gold standard is simple and it works.

          It means that the American government defines its currency as a fixed amount of gold of a certain weight and purity. Under a gold standard you could go into the bank and bring in a tenth of an ounce’s value of gold—say $100 under a gold standard—and receive a $100 gold coin. Alternatively, you could bring in that gold coin and either deposit it in your bank or checking account receiving a deposit credit for $100 convertible to an ounce of gold on demand or get $100 in gold certificates (paper money).

          History shows decisively that with purely paper money we experience a chronically eroding dollar and lower job creation. The country and the world are less prosperous, recessions are longer and steeper, and the vast majority of families and businesses are much worse off than they are under a classical gold standard. The classical gold standard is not perfect. It is not some romantic utopian notion. It is, as the Institute’s Founder Lewis E. Lehrman notes, the “least imperfect” of monetary systems.

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          • #6
            Re: Types of Inflation

            You are right on the money........That is absolutely correct information....Any new emerging student should know about all the four points of Inflation....
            Cheers
            Keep up the good work.
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            • #7
              Re: Types of Inflation

              Thank you for explaining the basics in silence for calculating inflation. Thank u for posting such information. really good and helpful.. Inflation is commodity inflation, better known as cost-push inflation. We can see it today in commodity prices such as energy and metals. Energy and food price changes are excluded from "core" inflation because of their period-to-period volatility.
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              • #8
                Re: Types of Inflation

                I would like to share a few points on Hyperinflation is also known as runaway inflation or galloping inflation. This type of inflation occurs during or soon after a war. This can usually lead to the complete breakdown of a country’s monetary system. However, this type of inflation is short-lived.
                hope my points would be beneficial for u..
                thanks...
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                • #9
                  Re: Types of Inflation

                  Wage Inflation: Wage inflation is also called as demand-pull or excess demand inflation
                  Cost-push Inflation: As the name suggests, if there is increase in the cost of production of goods and services, there is likely to be a forceful increase in the prices of finished goods and services.
                  Pricing Power Inflation: Pricing power inflation is more often called as administered price inflation.
                  Sectoral Inflation: This is the fourth major type of inflation. The sectoral inflation takes place when there is an increase in the price of the goods and services produced by a certain sector of industries.
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                  • #10
                    Re: Types of Inflation

                    what exactly is cost push and demand pull not just that there types of inflation.
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                    • #11
                      Re: Types of Inflation

                      Other Types of Inflation

                      Fiscal Inflation: Fiscal Inflation occurs when there is excess government spending. This occurs when there is a deficit budget. For instance, Fiscal inflation originated in the US in 1960s at the time President Lydon Baines Johnson. America is also facing fiscal type of inflation under the presidentship of George W. Bush due to excess spending in the defense sector.

                      Hyperinflation: Hyperinflation is also known as runaway inflation or galloping inflation. This type of inflation occurs during or soon after a war. This can usually lead to the complete breakdown of a country’s monetary system.
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                      • #12
                        Re: Types of Inflation

                        Types of Inflation are as below:
                        1) Wage Inflation
                        2) Hyperinflation
                        3) Cost-push Inflation
                        4) Pricing Power Inflation
                        5) Fiscal Inflation
                        6) Sectoral Inflation
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                        • #13
                          Types of Inflation

                          There are 3 Types of Disasters:

                          - Personal
                          - Natural
                          - People-caused

                          What of the 3 types could you experience or happen in your area? To find out what Natural or People-caused disasters that can happen in your area, do you know where and how to find this information?

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