Types of inflation and its essence

Inflation - this is what each of us knows firsthand. In a market economy, this phenomenon has become permanent in any country. Types of inflation depend on the reasons for which it occurs. But this is always a serious problem for the country and government. Therefore, we will analyze the essence of inflation and the reasons that cause it.

To start with a little terminology. Inflation is the depreciation of money, in connection with which there is a rise in prices for goods and services. It is important to note that such a rise in the price of goods is not due to an increase in their quality.

We can say that inflation, essence and types of depreciation are the presence of a large amount of money in circulation with fewer goods that can be purchased.

But not all inflation gives only trouble. It is beneficial to those who must repay the debt. The refund amount will be less valuable if it was taken without interest. The state, while paying social benefits and not recalculating them in connection with inflation, also remains in benefit. Another category that increases the price and depreciation of money is profitable, are exporters.

Types and types of inflation are the following.

Inflation, created artificially (that is, there was an increase in prices, which 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, higher prices for goods and services, then this event is called hyperinflation. This is a very negative manifestation, which affects the entire economy of the country, and especially the prosperity of its citizens.

The built-in inflation is more balanced. It is characterized by a gradual and not very high price increase for a certain period.

This process can affect some particular factor or part of the production cycle. Inflation of costs is typical for 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 rate of inflation in one country is inextricably linked with the entire world economy. Types of inflation are almost always relevant to any events outside the state. In this case, there is imported inflation. Its appearance is associated with a large amount of foreign capital, which enters the country or with an increase in the prices of imported products.

The economy is influenced by external environmental factors. If there is an increase in prices, then induced inflation occurs.

As a result of the large credit expansion, credit inflation takes place.

Usually many types of inflation can be predicted. But if the level of growth was much higher than expected, then such a case is called unforeseen inflation. Accordingly, if the rate of inflation has been within the forecast, it is called the expected.

A very frequent reason for inflation is the rise in prices for goods and materials. In this case, it is called open.

If, as a result of a deficit of goods , artificially restraining prices by the state, then latent inflation begins. Goods disappear from free sale and appear on the black market at inflated prices.

Gradual price increases for a long time are characteristic of creeping inflation.

And, finally, the excess of demand over supply, and, as a consequence, the growth of the cost of goods and services leads to inflation of demand.

Thus, all types of inflation are characterized by higher prices and depreciation of the money supply. They occur for various reasons and affect the economy to some extent.