Definition
Inflation is a persistent rise in the general price level rather than a once-for-all rise in it.
- According to Pigou, “Inflation exists when money income is expanding more than in proportion to increase in earning activity.”
- According to Coulborn, Inflation is a situation of “too much money chasing too few goods”.
- According to Friedman, “Inflation is always and everywhere a monetary phenomenon….and can be produced only by a more rapid increase in the quantity of money than output”.
Types of Inflation
On the basis of Rate
| Creeping Inflation |
Less than 3% |
| Chronic Inflation |
Creeping inflation for longer period of time |
| Walking Inflation |
3% to 10% |
| Running Inflation |
More than 10% |
| Galloping Inflation |
20% to 1000% |
| Hyperinflation |
More than 1000% |
On the basis of Causes
| Demand-Pull Inflation |
Too much money chases too few goods |
| Cost-Push Inflation |
Prices rise due to growing cost of production of goods and services then it is known as Cost-Push Inflation |
| Scarcity Inflation |
Due to hoarding |
| Structural Inflation |
Due to structural changes i.e., bottlenecks |
On the basis of Coverage
| War-Time Inflation |
Scarcity of resources due to reallocation increase prices |
| Post-War Inflation |
After the war, government controls are relaxed, resulting in a faster hike in prices than what experienced during the war. |
| Peace-Time Inflation |
Due to government expenditure |