This is the process by which the price level rises andmoney loses value.It can be further categorized into following:a)Demand-pull inflationb)Cost-push inflation
It can be commonly described as ,“too much moneychasing too few goods”.Demand pull inflation may be due to :Increase in money supplyIncrease in government purchasesIncrease in exports
Cost-push inflation is a type of inflation caused bysubstantial increases in the cost of important goodsor services where no suitable alternative isavailable.Causes of Cost push inflation are:Increase in money wage ratesIncrease in money prices of raw materials.
• Price rise is quite low• Rate of inflation is upto 3% per annum• Not considered to be damaging foreconomic growth
Rate of inflation is (3-10)% per anuum Developing countries experience thisrange of inflation
• Inflation rate becomes alarming ,the rate liesbetween the (10-20)% per annum• It is a reason of worry
• Inflation Rate goes beyond 20% per annum• This situation is hard to cope with becauseall economic policies gets derailed
• Inflation rate is huge about 1000% per annum• It was really something we can call a “DISASTER”.• Extremely rapid or out of control inflation.*There is no precise numerical definition tohyperinflation. Price increases are so out of controlthat the concept of inflation is meaningless.*The most famous example of hyperinflation occurredin Germany between January 1922 and November1923.By some estimates, the average price levelincreased by a factor of 20 billion!
1. Excess liquidity of money2. Credit Expansion3. Government Investment4. Fiscal Policy5. Poor Infrastructure6. Black Marketing & Corruption7. Shortage of essential commodities8. Population growth