The rise or increase in the price of goods and services in an economy and its effect on the cost and standard of living of its people can be termed as inflation. To understand this concept and to take measures to manage it certain factors need to be considered. The cause of inflation needs to be assessed and the effect of it should be forecasted so that some preventive measures can be taken.
The types of inflation should be understood so that each of it can be handled specifically. There is a broad categorization of inflation which is creeping inflation, walking inflation, galloping inflation and hyperinflation. But experts classify generally into two types called as demand-pull inflation and cost-push inflation. Understanding of the types and the causes are very crucial to lead a peaceful status in the society.
Taking a closer look at the types:
- Creeping Inflation: as the name suggests this is a slow paced inflation, which is estimated at an approximate of 3 percentages or less per year. This is beneficial to the economy because it helps the common man also to understand when the price may increase and it helps to manage according to their standard of living. The effect of this is that it boosts up demand for the products as people will buy more to stock up the products for future.
- Walking Inflation: this is the type of inflation which is ranging between 3 percent and 10 percent in a year. This is dangerous as it as it will boost the economic growth at a quicker rate. This will have heavier demand for goods as people buy more now. The result happens to hit the common people when necessary goods reach a high price which is unusual.
- Galloping Inflation: this is an absolute havoc creating the type of inflation. The percentage of increase will be more than 10 percent. Money value increases very fast that the business people can’t keep up with the increase in the prices.Foreign investors avoid investments at such times.the economy loses stability at such times.Always galloping inflation must be prevented for the economic safety.
- Hyperinflation: this is skyrocketing inflation when it reaches a value of above 50 percent increase in a month. This is unusual and happens very rarely as the economy cannot be balanced at such times. Especially during civil wars, such type of inflation occurs.
A detailed knowledge and research should be undertaken so that the common people are aware of what may occur with economic changes like inflation.