What are the different types of Inflation?

Modified on Tue, 17 Jul 2018 at 11:28 AM

At its most basic level, inflation is a general increase in prices across the economy and is well-known to all of us. After all, who among us has not reminisced about cheap rents of the past or how little lunch used to cost? And who has not noticed prices on everything from milk to movie tickets creeping upward? In this article, we explore the major types of inflation and touch upon the competing explanations offered by different economic schools.

Stagflation and Hyperinflation: Two Extremes

Although as consumers we may hate rising prices, many economists believe a moderate degree of inflation is healthy for a nation’s economy. Typically, central banks aim to maintain inflation around 2% to 3%. Increases in inflation significantly beyond this range can lead to fears of possible hyperinflation, a devastating scenario in which inflation rises rapidly out of control.

Negative Inflation

Also known as deflation, negative inflation occurs when prices drop for various reasons. Having a smaller money supply increases the value of money, which in turn decreases prices. A reduction in demand either because there is too large of a supply or a reduction in consumer spending can also cause negative inflation.


Source : Investopedia


Was this article helpful?

That’s Great!

Thank you for your feedback

Sorry! We couldn't be helpful

Thank you for your feedback

Let us know how can we improve this article!

Select atleast one of the reasons
CAPTCHA verification is required.

Feedback sent

We appreciate your effort and will try to fix the article