Inflation
Meaning:
Inflation refers to a persistent increase in the general price level of goods and services over
a period of time.
When inflation rises, the purchasing power of money decreases — meaning people can buy
fewer goods with the same amount of money.
Types of Inflation:
Type Meaning
Demand-Pull Inflation Occurs when demand exceeds supply.
Cost-Push Inflation Occurs when production costs increase
(wages, raw materials).
Creeping Inflation Slow and steady rise in prices (2–3% per
year).
Galloping Inflation Rapid increase in prices (10% or more).
Hyperinflation Extremely high and uncontrolled inflation
(e.g., 100%+).
Built-in Inflation Caused by wage-price cycle (higher wages
→ higher prices).
Causes of Inflation:
1. Increase in money supply
2. High demand for goods and services
3. Increase in production cost
4. Government deficit spending
5. Supply chain disruption
Effects of Inflation:
Positive Effects
Meaning:
Inflation refers to a persistent increase in the general price level of goods and services over
a period of time.
When inflation rises, the purchasing power of money decreases — meaning people can buy
fewer goods with the same amount of money.
Types of Inflation:
Type Meaning
Demand-Pull Inflation Occurs when demand exceeds supply.
Cost-Push Inflation Occurs when production costs increase
(wages, raw materials).
Creeping Inflation Slow and steady rise in prices (2–3% per
year).
Galloping Inflation Rapid increase in prices (10% or more).
Hyperinflation Extremely high and uncontrolled inflation
(e.g., 100%+).
Built-in Inflation Caused by wage-price cycle (higher wages
→ higher prices).
Causes of Inflation:
1. Increase in money supply
2. High demand for goods and services
3. Increase in production cost
4. Government deficit spending
5. Supply chain disruption
Effects of Inflation:
Positive Effects
