Meaning of Inflation:

Inflation is a global phenomena. It occurs in every type of economy. Inflation is a condition with increasing prices which causes a decrease in the purchasing power of money. Inflation is a price rise which is unseen and uncorrected situation. It occurs in both time war as well as in peace time. The types of inflation depends on the different basis.

Inflation refers to the general increase in prices of goods and services in an economy over a period of time, leading to a decrease in the purchasing power of money. When inflation occurs, each unit of currency buys few goods and services. It is measured as a percentage increase in the Consumer Price Index (CPI) or the Producer Price Index (PPI).

Crowther, defines inflation as a state in which the value of money is falling, prices are rising.

Types of Inflation:

On the basis of the rate of increase in prices, inflation can be divided in to.

• Creeping inflation: There is a mild rise in prices which is called as creeping inflation. It occurs when there is sustained rise in prices overtime at a mild rate says around 2 to 3% per year. This inflation is also called as moderate inflation and it is regarded as stable inflation. This inflation does not disturb the balance of the economy.
• Walking or trolling inflation: It occurs when the rate of rise in inflation is in the range of 3 to 6% per annum. This inflation is a warning for the occurrence of running inflation. Prof. Samuelson has clubbed creeping and walking inflation in to moderate inflation.
• Running inflation: When the price accelerates rapidly running inflation emerges. Generally it is around 8 to 10% per annum (warning signal) In this case price level doubles up every three years, succeeded by galloping inflation.
• Galloping inflation: It occurs when monthly increases in price 22 to 30% or more. At this stage there is no limit to price rise and price rise go out of control and complete collapse of currency. This inflation often causes because of too much currency notes which results in lack of confidence of the people in the currency. This is the situation where there is uninterrupted rise in prices. Prof. Samuelson explains when the price are rising at double or triple digit rates, that situation may called as galloping inflation. Galloping inflation is a serious problem, it causes economic distortion and disturbances.
• Open inflation: Inflation is said to be open when there is no barrier to price rice. It is a situation where the prices are permitted to rise without being suppressed by price controls or other similar techniques by the govt.
• Suppressed inflation: It occurs when there is inflationary pressure in the economy but prices are control by certain administrative measures. Here the demand for goods is postponed by the imposition of price controls and rationing, and rise in prices is suppressed. This type of inflation is not good to the economy.

CONCLUSION:

Each type of inflation has its own causes, implications, and potential policy responses. These differences can help policymakers and individuals better manage the effects of inflation on the economy.

also read: explain the effects of inflation on distribution.