This document discusses inflation, defining it as a sustained rise in aggregate market prices. It identifies four types of inflation based on price increase rates: creeping, walking, running, and hyper. Demand-pull inflation occurs when demand exceeds supply, while cost-push inflation is due to increased production costs. Factors that can increase demand-pull inflation include population growth, money supply increases, and government spending, while cost-push factors include wage increases, taxes, and basic material prices. The effects of inflation vary among groups, with fixed-income earners hurt the most, farmers benefiting in the short-term, and producers seeing short-term gains but potential long-term losses.

1. Inflation
By karthik

2. Introduction
● Inflation is the sustained rise of
aggregate market prices.
● Refers to a state of rising prices and
high prices.

3. Types of Inflation
Creeping inflation
also called mild
inflation
Walking inflation
also called trotting
inflation
Running
inflation
Hyper-Inflation also
called galloping
inflation
Price rate
rises at a very
slow rate
Regular rate at
which price rates
of an economy
rises
Price rate
increases at a
faster rate than
in walking
inflation
Price rate
increases at a
significantly
rapid rate
Rate is around
2% to 3% per
annum
Rate is around
5% to 6% per
annum
Rate is 10% and
above per annum
General price level
increases at the
rate of 200% or
more per month

4. Demand pull inflation Cost push inflation
Also called excess demand inflation
It is the inflation where aggregate
demand(total demand)exceeds the
economy’s ability to supply the
goods and services at current
prices, so that prices are increased
by excess demand
Often described as "too much money
chasing too few goods."
Also called inflationary pressure
It is the inflation where price of
goods and services increases due to
increase in cost of production of
goods and services.
Demand pull and cost push
inflation

5. Factors responsible for increase
in demand-pull inflation
Population pressure Increasing supply of money Growing government
expenditure
Growing population have
Increased demand for
various goods such as
food, electrical
appliances
When government spending
increases in the country
this outputs an increase
in the flow of money in a
country
The continous government
expenditure on the
industries create more
employment opportunities
This has created a price
rise in the goods to
support its production
This has created increased
demand for goods and
services
This creates more
purchasing power for the
public which in turn
increases the demand

6. Factors responsible for the
increase in cost-push inflation
Rise in wages Higher taxes Increase in price of basic
materials
Workers form trade unions
and demand for higher
wages. The rise in wages
will lead to high product
prices by producers.
Taxpayers can easily shift
the burden of tax to
others.
Basic materials are used
directly or indirectly in
the production process.
The increase in the
product prices will again
lead to workers to demand
for higher wages.
This leads to an increase
in prices of different
commodities.
When the prices of such
materials increase the
economy will be affected
with high prices.

7. Effects of inflation
distribution

8. fixed income group
● Wage and salary earners suffer
during inflation
● This is because wages and
salaries don’t increase in the
same proportion in which the
prices or cost of production
increases
● Those workers and employees who
have formed strong trade unions
tend to lose less

9. Farmers
● Farmers tend to lose less during
periods of inflation because they
can obtain better prices for
their crops during inflation
● Moreover farmers are generally
debtors as they borrow funds for
agricultural purposes
● However small farmers don’t gain
much during inflation because
major portion of their produce is
kept for self consumption

10. Producers
● During inflation, the producers and
businessmen gain in the short period.
Usually the cost of production does not
rise as fast as the price of their
product.
● As against this they may also be
affected adversely on the long run. If
the price level goes on increasing, the
total consumption of their product would
fall.
● The reduced consumption will ultimately
rise the cost of production per unit and
reduce the profits