inflation in all countries are not of the same types. in some countries price increases very slowly while in some countries price increases very rapidly. therefore, inflation is classified on the basis of increase in price. in some countries, inflation occurs even in the state of peace while in some countries inflation occur during the time of war. thus, inflation can be classified as follows:
1. on the basis of speed
2. on the basis of time
3. on the basis of scope
4. on the basis of government reaction
5. on the basis of employment
6. By cost push and demand pull induced
1. on the basis of speed
inflation can be classified on the basis of speed of increase in price of the goods. in the basis of speed, inflation can be divided into four types. they are:
(1) creeping inflation
creeping inflation is a slow inflation in this type of inflation, price increases about at the rate of 2 percent year. so, slow increase in price is not taken as bed.
(2) walking inflation
this is the second type of inflation. in this type of inflation price increase about at the rate of 5 percent every year. after the emergence of walking inflation in the economy the economic crisis will start.
(3) running inflation
this is the third stage of inflate. in this stage, the speed of increase in price is high. in this type of inflation price increase about at the rate of 10 percent every year.
(4) hyper inflation
this type of inflation is also known as galloping inflation. Keynes has taken this as the real inflation. in such a situation occurs after the state of full employment. this type of inflation was experienced by Germany in 1923 after "second world war". by Hungary in 1947 and by china in 1949.
2. on the basis of time
on the basis of time, inflation can be divided into type. they are:
(1) peace-time inflation
in developing countries, during the time of peace different projects will be in operation. in such projects the government will invest in great amount . but investment in such projects won't directly help in the production of consumption goods. only infrastructures for production or expansion of markets will be prepared. in such situation many people will increase their income as a result of being employed. as a result, a great gap will occur between income and consumption goods. that is, there will be disequilibrium between demand and supply and this will lead to inflation. inflation occurring in such situation is known as peace-time inflation.
(2) war-time inflation
inflation that occurs during the time of war is known as war-time inflation. since lots have to be spent on war, the government uses all the resources of the country for the purpose of war. in such a situation, despite the increase in the supply of money, the production of consumption goods won't increase. as a result a inflationary gap occurs and price increases.
(3) post-war inflation
in general, after the war the demand for consumption goods will increase. mostly during war people are highly taxed. but after the war the burden of tax will be removed which will result in the increase in great quantity, the production of consumption goods won't increase immediately. due to the higher demand for than the supply of goods the price of goods will increase creating inflation. this type of inflation after war is known as post- war inflation.
3. on the basis of scope
on the basis of scope, inflation can be divided into two type. they are:
(1) comprehensive inflation
increase in the price of all goods and services available in the country is known as comprehensive inflation. under this , the price of all goods and services production in the economy will increase.
(2) sporadic inflation
increase in the price in only one sector of the economy is known as sporadic inflation. this type of inflation occurs due to some specific reasons. for example. if production is stopped or decreased due to natural causes, then this type of inflation will occur.
4. on the basis of government reaction
on the basis of government reaction inflation can be divided into two types. they are:
(1) open inflation
if the government does not rake any measures to control the increase in price in the market and as a result price increases, then this type of inflation is known as the open inflation. in such a situation, price is determined in the market by the market structure. when any goods become scarce or less in the market, then the industries will increase the price of such goods. the inflation that occurred in countries like Germany, Australia, Russia, etc. after "first world war"and in countries like, Greece, china, Poland etc. after" \second world war" is the example of open inflation.
(2) suppressed inflation
in suppressed inflation, the government tries to control the increase in price through price control and different other policies. if the government fully succeeds in controlling the price in the economy, then the price of goods and services will remain constant and this will be known as suppressed inflation. suppressed inflation can have many types of negative effects in the economy. for the price control, price controller and suppliers have to be appointed. thus appointed people have to be skilled, efficient, experienced and trustworthy. that is it is very necessary for such people to possess good qualities. otherwise price increase will be comprehensive. Milton Friedman has said, "suppressed inflation is far more dangerous than open inflation." in Nepal, after the movement of 2046 B.S. , the government opened subsidy shops, but price increased in the market comprehensively. this can be taken as an example of suppressed inflation.
5. on the basis of employment level
on the basis of employment level also, inflation can be divided in to two types. they are:
(1) partial inflation
before the state of full employment,due to increase in income of people the available factors will be efficiently and fully utilized which will result in the increase in the level employment. but in such increase, the increase in the quantity of production will be less relative to the increase in employment. this type of increase in price is known as partial inflation.
(2) full inflation
after the state if full employment in the economy, the production will not increase in proportion to the increase in the quantity of money. so, inflation resulted due to disequilibrium between production and the quantity of money is known as full inflation.
6. cost push and demand pull inflation
in modern age two main through have emerged in relation to the causes of inflation. according to one thought, inflation occurs due to excessive demand. this inflation is known as "demand pull inflation" according to the other thought, inflation occurs due to increase in the cost. this inflation is known as " cost push inflation" .demand pull inflation and cost push inflation are interrelated because both of these will increase the inflation. these can be explained separately as follows:
(1) cost push inflation
modern economists have taken the increase in the production cost as the main reason for the increase in the price. that is if production cost of goods increases due to some reasons, then the price will increase,. the production cost increase when price of every factor of production is increased with the view of distributing national income equally. when price of any factors of production increase, the price of goods will also increase. increase in tax , increase in wage, international cause, increase in profit etc. are some of the main reasons for the increase in cost.
(2) demand pull inflation
according to the theory of "demand pull inflation", if aggregate supply i money required for current price of goods and services is in excess then" demand pull inflation" will be resulted. that is , according to the theory of quantity of money, when the state of full employment is created in the economy, then supply of money will increase resulting demand pull inflation. when market price increase comprehensively due to normal increase in the demand in the economy, the demand pull inflation will be resulted. for example, in Nepal , if the government proposes the deficit budget for the completion of various plans, then such deficit budget is met by raising internal loan or by issuing new note. this will help in the completion of various development and constructive works in the country. but this deficit budget will increase the income of the public, this will then result in the increase in demand and "demand pull inflation" will be created.
according to this concept, the inflation occurs when the demand further increase after reaching th state of full employment,. in such situation aggregate demand will be more than the aggregate supply because after the state of full employment supply won't increase despite the increase in demand. therefore, price of goods will increase. this is known demand pull inflation.
1. on the basis of speed
2. on the basis of time
3. on the basis of scope
4. on the basis of government reaction
5. on the basis of employment
6. By cost push and demand pull induced
1. on the basis of speed
inflation can be classified on the basis of speed of increase in price of the goods. in the basis of speed, inflation can be divided into four types. they are:
(1) creeping inflation
creeping inflation is a slow inflation in this type of inflation, price increases about at the rate of 2 percent year. so, slow increase in price is not taken as bed.
(2) walking inflation
this is the second type of inflation. in this type of inflation price increase about at the rate of 5 percent every year. after the emergence of walking inflation in the economy the economic crisis will start.
(3) running inflation
this is the third stage of inflate. in this stage, the speed of increase in price is high. in this type of inflation price increase about at the rate of 10 percent every year.
(4) hyper inflation
this type of inflation is also known as galloping inflation. Keynes has taken this as the real inflation. in such a situation occurs after the state of full employment. this type of inflation was experienced by Germany in 1923 after "second world war". by Hungary in 1947 and by china in 1949.
2. on the basis of time
on the basis of time, inflation can be divided into type. they are:
(1) peace-time inflation
in developing countries, during the time of peace different projects will be in operation. in such projects the government will invest in great amount . but investment in such projects won't directly help in the production of consumption goods. only infrastructures for production or expansion of markets will be prepared. in such situation many people will increase their income as a result of being employed. as a result, a great gap will occur between income and consumption goods. that is, there will be disequilibrium between demand and supply and this will lead to inflation. inflation occurring in such situation is known as peace-time inflation.
(2) war-time inflation
inflation that occurs during the time of war is known as war-time inflation. since lots have to be spent on war, the government uses all the resources of the country for the purpose of war. in such a situation, despite the increase in the supply of money, the production of consumption goods won't increase. as a result a inflationary gap occurs and price increases.
(3) post-war inflation
in general, after the war the demand for consumption goods will increase. mostly during war people are highly taxed. but after the war the burden of tax will be removed which will result in the increase in great quantity, the production of consumption goods won't increase immediately. due to the higher demand for than the supply of goods the price of goods will increase creating inflation. this type of inflation after war is known as post- war inflation.
3. on the basis of scope
on the basis of scope, inflation can be divided into two type. they are:
(1) comprehensive inflation
increase in the price of all goods and services available in the country is known as comprehensive inflation. under this , the price of all goods and services production in the economy will increase.
(2) sporadic inflation
increase in the price in only one sector of the economy is known as sporadic inflation. this type of inflation occurs due to some specific reasons. for example. if production is stopped or decreased due to natural causes, then this type of inflation will occur.
4. on the basis of government reaction
on the basis of government reaction inflation can be divided into two types. they are:
(1) open inflation
if the government does not rake any measures to control the increase in price in the market and as a result price increases, then this type of inflation is known as the open inflation. in such a situation, price is determined in the market by the market structure. when any goods become scarce or less in the market, then the industries will increase the price of such goods. the inflation that occurred in countries like Germany, Australia, Russia, etc. after "first world war"and in countries like, Greece, china, Poland etc. after" \second world war" is the example of open inflation.
(2) suppressed inflation
in suppressed inflation, the government tries to control the increase in price through price control and different other policies. if the government fully succeeds in controlling the price in the economy, then the price of goods and services will remain constant and this will be known as suppressed inflation. suppressed inflation can have many types of negative effects in the economy. for the price control, price controller and suppliers have to be appointed. thus appointed people have to be skilled, efficient, experienced and trustworthy. that is it is very necessary for such people to possess good qualities. otherwise price increase will be comprehensive. Milton Friedman has said, "suppressed inflation is far more dangerous than open inflation." in Nepal, after the movement of 2046 B.S. , the government opened subsidy shops, but price increased in the market comprehensively. this can be taken as an example of suppressed inflation.
5. on the basis of employment level
on the basis of employment level also, inflation can be divided in to two types. they are:
(1) partial inflation
before the state of full employment,due to increase in income of people the available factors will be efficiently and fully utilized which will result in the increase in the level employment. but in such increase, the increase in the quantity of production will be less relative to the increase in employment. this type of increase in price is known as partial inflation.
(2) full inflation
after the state if full employment in the economy, the production will not increase in proportion to the increase in the quantity of money. so, inflation resulted due to disequilibrium between production and the quantity of money is known as full inflation.
6. cost push and demand pull inflation
in modern age two main through have emerged in relation to the causes of inflation. according to one thought, inflation occurs due to excessive demand. this inflation is known as "demand pull inflation" according to the other thought, inflation occurs due to increase in the cost. this inflation is known as " cost push inflation" .demand pull inflation and cost push inflation are interrelated because both of these will increase the inflation. these can be explained separately as follows:
(1) cost push inflation
modern economists have taken the increase in the production cost as the main reason for the increase in the price. that is if production cost of goods increases due to some reasons, then the price will increase,. the production cost increase when price of every factor of production is increased with the view of distributing national income equally. when price of any factors of production increase, the price of goods will also increase. increase in tax , increase in wage, international cause, increase in profit etc. are some of the main reasons for the increase in cost.
(2) demand pull inflation
according to the theory of "demand pull inflation", if aggregate supply i money required for current price of goods and services is in excess then" demand pull inflation" will be resulted. that is , according to the theory of quantity of money, when the state of full employment is created in the economy, then supply of money will increase resulting demand pull inflation. when market price increase comprehensively due to normal increase in the demand in the economy, the demand pull inflation will be resulted. for example, in Nepal , if the government proposes the deficit budget for the completion of various plans, then such deficit budget is met by raising internal loan or by issuing new note. this will help in the completion of various development and constructive works in the country. but this deficit budget will increase the income of the public, this will then result in the increase in demand and "demand pull inflation" will be created.
according to this concept, the inflation occurs when the demand further increase after reaching th state of full employment,. in such situation aggregate demand will be more than the aggregate supply because after the state of full employment supply won't increase despite the increase in demand. therefore, price of goods will increase. this is known demand pull inflation.
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