What is inflation and its types?
Inflation - is a process,characterized by a constant increase in prices. As a result, money begins to depreciate against assets. Inflation depends on a number of factors. But it must be remembered that not every change in value is to it.
Let us consider in detail what inflation and its types are. This process manifests itself as a stable phenomenon. On the market you can observe a constant increase in prices or temporary jumps. In the first case, it is just about inflation, and in the second one about seasonal changes in value.
When inflation increases, the overall price index, and notthe value of all goods in general. At a certain point in time, some products may become more expensive, others may become cheaper, while others may remain at the same level. But if the overall index, that is, the GDP deflator, shows growth, then it is about inflation. In the economy there is the concept of "deflation" - with it, the price level falls.
So, we continue to consider what isinflation and its types. This economic process leads to the fact that the purchasing power of money is sharply reduced. People over time can buy fewer units of goods for the same amount.
The concept and types of inflation - one of the mainsections in economic theory. She considers the classification of this process. So, according to the growth rate, inflation is subdivided into moderate, galloping, high and hyperinflation. Let's study each of them in more detail.
Moderate inflation is characteristic of moderneconomy. It is observed in most parts of the world. Moderate inflation is expressed by a slight increase in the price level per year. Its value is on average 3-5%. The maximum allowable growth is 10%. This kind of inflation is an incentive for expanding production volumes.
We continue to study what inflation and its types are. Galloping is also measured in percent for one year. But, unlike moderate inflation, it is expressed in double digits, and is a serious problem for the economies of developed countries.
High inflation is expressed in percents per month. In a year, it is quite a large growth rate. Figures can exceed 200%. This type of inflation can be observed in countries with economies in transition and in developing countries.
Hyperinflation has tremendous growth rates. It is measured by percent per day or per week. For a month, the price increase can be 50%, and in the year to reach 1000%. In history, such vivid cases of hyperinflation are known. Germany, January 1922 - December 1924. The increase in the price level was 1012%. Hungary in August 1945 - July 1946 suffered from hyperinflation (an increase in the price level of over 1027%).
So, we have considered, the concept of "inflation" and itskinds. But this process can also be classified depending on the form of manifestation. Distinguish hidden and explicit inflation. The first kind is connected with the actions of the state. It initially sets the level of prices below equilibrium. In this regard, there is a shortage of goods on the market. Explicit inflation is observed in the growth of the price level. We can observe it constantly in the form of an increase in the cost of goods and services.
What are the causes and types of inflation? The main classification we examined, but in connection with which there is a constant increase in prices, we will clarify below.
The constant increase in the mass of money in circulation is associated with a number of reasons:
- budget deficit forces to include a "printing press";
- the state is pursuing an expansionary financial policy;
- Loans are widely used;
- Debt obligations are payment means;
- the demand for goods and services increases compared to the previous period;
- Increased production costs;
- Other reasons.
Inflation is inevitable in the market. It is important that it does not go into an uncontrolled process. The inflation is mainly watched by the governments of states.