Inflation refers to the condition of the economy in which there is a
continuous increase in the prices of goods and services, and in this
situation the value of money decreases because consumers have to
pay more to buy goods in the market.
Various types of Inflation
Inflation Type Definition Features
Demand Pull When the demand for goods Due to increase in
Inflation and services in an economy is population, urbanization,
more than the supply increase in employment,
increase in government
expenditure and increase
in income of citizens
Cost Pull When there is an increase in the Due to increase in
Inflation cost of a commodity in the indirect taxes, higher
process of production taxes on intermediate
goods used in production
of goods and increase in
prices of structural
industries
Stagflation It is characterized by slow Period of inflation
economic growth and relatively combined with a decline
high unemployment in the gross domestic
product (GDP).
Hyperinflation When inflation rises at an Due to government
extremely fast rate. The rate of issuing too much
inflation can increase from 50 currency to finance its
times to 300 times. deficits; wars and
political instabilities and
unexpected increase in
people’s anticipation of
future inflation.
Deflation When there is a decrease in the This is the opposite of
demand for goods due to excess inflation, in which the
supply in the market, then the rate of inflation is
price also falls rapidly; Due to negative or below zero.
which the purchasing power of
money increases, this situation
is called currency contraction or
currency deflation.
Disinflation It is the process of controlling Although it is not as
inflation, under which an harmful to the economy
attempt is made to bring the as deflation.
price back to normal by
gradually reducing it.
Reflation This is such a system of inflation In fact it is a process to
in which an attempt is made to control deflation.
bring the price to normal level
by gradually increasing it.
Skewflation When the price increase is for In such a situation, the
only a few products instead of rate of inflation remains
all the products, it is called high in some areas and
squelch inflation. the situation of currency
contraction is seen in
some areas.
Creeping The condition of the economy in This type of inflation is
inflation which the rate of inflation is 3% commonly seen in
or less is called creeping developed countries
inflation. (USA). This type of
inflation is considered
good for the economy.
Headline Headline inflation is also called This index covers all
Inflation 'overall inflation'. It is issued on consumer goods,
the basis of the Consumer Price including food and fuel.
index.
Core Inflation Core inflation measures changes Core inflation is
in the cost of goods and important because it is
services, although it excludes used to determine the
the food and energy sectors, as effect of rising prices on
their prices are more volatile consumer income
