TYPES OF INFLATION OVERVIEW:
| Based On Causation
• Demand Pull Inflation • Cost Push Inflation • Monetary Inflation • Built In Inflation • Headline/Core Inflation • Profit Induced Inflation • Structural Inflation | Based On Speed
• Creeping Inflation (1-4%) • Walking Inflation (4-10%) • Running Inflation (10-20%) • Galloping or Hyperinflation (20-100%) | Others
• Skewflation • Stagflation | | --- | --- | --- |
DEMAND PULL INFLATION:
COST PUSH INFLATION:
BUILT IN INFLATION:
MONETARY INFLATION:
STRUCTURAL INFLATION:
PROFIT INDUCED INFLATION:
CORE INFLATION:
HEADLINE INFLATION:
SKEWFLATION (Skew + flation):
STAGFLATION:
| Phillips Curve: | • Inverse relationship between unemployment and inflation. |
|---|---|
| BASE EFFECT | •The impact of the last year’s inflation over the corresponding rise in the current inflation. The base can make inflation high or low, even if prices are the same in the period. |
| INFLATIONARY GAP | DEFLATIONARY GAP |
|---|---|
| The Inflationary gap is a situation when Aggregate demand exceeds the Aggregate supply at the full employment level | The Deflationary Gap is when Aggregate demand is lower than Aggregate Supply at the full employment level |
| Overemployment | Underemployment |
| Excess of Aggregate demand | Lack of aggregate demand |
| Need for restrictive fiscal and monetary policies like lesser government spending, more taxes and higher interest rates | Need for more expansionary fiscal and monetary Policies like More government spending, less taxes, lower interest rates. |