Our Lady of the Sacred Heart College of Guimba Inc. Mar.

Eloisa Lyn C. Cristobal BSEd- 3rd Year

Mr. Raymond De Gracia Instructor

Inflation
Inflation - The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. Central banks attempt to stop severe inflation, along with severe deflation, in an attempt to keep the excessive growth of prices to a minimum.

Types of Inflation
1. Open Inflation : When government does not attempt to restrict inflation, it is known as Open Inflation. In a free market economy, where prices are allowed to take its own course, open inflation occurs. When the government does not try to prevent a rise in prices, inflation is called as the opened. Thus, inflation is opened when the prices grow without any time-out. In open inflation, it is authorized to mechanism of the free market to execute the historical function of rationing of scarce goods and to distribute them on ability of consumers to pay. Thus, the basic characteristic of open inflation is work of the price mechanism as the unique agent of distribution. The post-war hyperinflation in the twenties in Germany is 20th century a living example of open inflation. 2. Suppressed Inflation : When government prevents price rise through price controls, rationing, etc., it is known as Suppressed Inflation. It is also referred as Repressed Inflation. However, when government controls are removed, Suppressed inflation becomes Open. The

Our Lady of the Sacred Heart College of Guimba Inc. Mar. 5 Case when the government stops a rise in prices is called as the suppressed or suppressed inflation. Thus, the suppressed inflation falls into to those conditions in which bullish

demonstration is prevented, now, by acceptance of certain measures on settlement and rationing of the prices by the government, but these prices raise at once at removal of these control facilities and rationing. The essential characteristic of the suppressed inflation, unlike opened, that it is directed on prevention of distribution of a rise in prices in the conditions of a free market mechanism is and replaces all it is the system of distribution based on control facilities. Thus, control introduction is the important feature of the suppressed inflation.

Nevertheless, many economists believe that at the inflation occurrence, opened, much better, than suppressed. Inflation repressing is condemned, as it bears in itself much more harm, such as a Krebs market, hierarchy of the prices and dependence on rationing officers, uneconomical costs of industrial resources of the basic industries. Inflation. Suppressed Inflation leads to corruption, black marketing, artificial scarcity, etc. 3. Galloping Inflation : According to Prof. Samuelson, if prices rise by double or triple digit inflation rates like 30% or 400% or 999% per annum, then the situation can be termed as Galloping Inflation. When prices rise by more than 20% but less than 1000% per annum (i.e. between 20% to 1000% per annum), galloping inflation occurs. 4. Creeping Inflation : When prices are gently rising, it is referred as Creeping Inflation. It is the mildest form of inflation and also known as a Mild Inflation or Low Inflation. According to R.P. Kent, when prices rise by not more than (up to) 3% per annum (year), it is called Creeping Inflation.

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5. Hyper Inflation : Hyperinflation refers to a situation where the prices rise at an alarming high rate. The prices rise so fast that it becomes very difficult to measure its magnitude. However, in quantitative terms, when prices rise above 1000% per annum (quadruple or four digit inflation rate), it is termed as Hyperinflation. During a worst case scenario of hyperinflation, value of national currency (money) of an affected country reduces almost to zero. Paper money becomes worthless and people start trading either in gold and silver or sometimes even use the old barter system of commerce. Two worst examples of hyperinflation recorded in world history are of those experienced by Hungary in year 1946 and Zimbabwe during 20042009 under Robert Mugabe's regime.