Inflation is something that each of us knows firsthand. In a market economy, this phenomenon has become constant in any country. Types of inflation depend on the reasons why it arises. But this is always a serious problem of the country and government. Therefore, we analyze the essence of inflation and the reasons that cause it.
First, some terminology. Inflation is the depreciation of money, in connection with which there is an increase in prices for goods and services. It is important to note that such a rise in price of goods is not due to an increase in their quality.
We can say that inflation, the nature and types of depreciation consist in the presence of a large amount of money in circulation with fewer commodity values that can be acquired.
But inflation isn’t all trouble for everyone. It is beneficial to those who must repay the debt. The refund amount will be less valuable if taken without interest. The state, paying social benefits and not recounting them in connection with inflation, also remains to the benefit. Another category in which price increases and the depreciation of money is beneficial are exporters.
Types and types of inflation are as follows.
Artificially created inflation (that is, there has been an increase in prices that can be controlled) is called administrative.
Sometimes there is a sharp increase in prices for goods. This can happen repeatedly and is called galloping inflation.
If there is too much depreciation of money and, as a consequence, an increase in prices for goods and services, then this event is called hyperinflation. This is a very negative manifestation that affects the entire economy of the country, and especially the prosperity of its citizens.
Built-in inflation is more balanced. It is characterized by a gradual and not very large increase in prices over a certain period.
This process may affect a particular factor or part of the production cycle. Cost inflation is typical with rising prices for raw materials, materials and other production factors. As a result, the cost of production and services is growing. A natural reaction to such an event is an increase in prices for the final product.
The inflation rate in one country is inextricably linked with the entire world economy. Types of inflation are almost always related to any events outside the state. In this case, imported inflation occurs. Its appearance is associated with a large amount of foreign capital that flows into the country or with an increase in prices for imported products.
The economy is also influenced by external environmental factors. If at the same time there is an increase in prices, then induced inflation occurs.
As a result of large credit expansion, credit inflation is occurring.
Typically, many types of inflation can be predicted. But if the growth rate was much higher than expected, then this case is called unforeseen inflation. Accordingly, if inflation growth rates were within the forecast, then it is called expected.
A very common cause of inflation is rising prices for goods and materials. In this case, it is called open.
If as a result of the shortage of goods there is an artificial price containment by the state, then hidden inflation begins. Goods disappear from free sale and appear on the black market at inflated prices.
A gradual increase in prices over time is characteristic of creeping inflation.
And finally, the excess of demand over supply, and, as a result, the increase in the cost of goods and services leads to inflation of demand.
Thus, all types of inflation are characterized by rising prices and the depreciation of the money supply. They occur for various reasons and affect the economy to one degree or another.