This document outlines the key concepts of macroeconomics including inflation, its types and causes and effects. It defines inflation as a sustained upward trend in general price levels, not a small or sudden rise. Inflation types are categorized based on causes such as currency, credit, deficit etc. and speed such as creeping, walking, running, hyper. Causes of inflation include demand-pull factors like excess spending and cost-push factors like increases in input costs. Effects are the impact on income distribution and economic growth, where some groups gain at the expense of others during inflationary periods which can incentivize investment.

1. Macro Economics
 M Ghani
 BBS(B&F)

2. Outlines
 Inflation
 Types
 Causes
 Effects
 Article Shared by
 Nikita Dutta

3. Inflation
 Sustained upward trend in the general level of prices.
 A small rise in prices or a sudden rise in prices is not inflation.

4. Types
1. On the basis of causes.
2. On the basis of speed.

5. 1. On the basis of causes.
a) Currency inflation.
b) Credit inflation.
c) Deficit-induced inflation.
d) Demand-pull inflation.
e) Cost-push inflation.

6. a) Currency inflation.
 Printing of currency notes.

7. b) Credit inflation.
 Being profit-making institutions, commercial banks sanction more loans and
advances to the public than what the economy needs.

8. c) Deficit-induced inflation.
 Expenditure exceeds revenue.

9. d) Demand-pull inflation
 An increase in aggregate demand over the available output leads to a rise in the
price level.

10. e) Cost-push inflation.
 Overall increase in the cost of production.

11. 2. On the basis of speed.
a) Creeping.
b) Walking Inflation.
c) Running inflation.
d) Hyperinflation.

12. a) Creeping.
 If the speed of upward thrust in prices is slow but small then we have creeping
inflation.
 Annual price rise varies between 2 % and 3 %.

13. b) Walking Inflation.
 If the rate of annual price increase lies between 3 % and 7%.

14. c) Running inflation
 If the rate of annual price increase lies between 10 % and 20%.

15. c) Hyperinflation.
 It is an extreme form of inflation when an economy gets shattered. "Inflation in the
double or triple digit range of 20 %, 100 % or 200 %”.

16. Causes
1: Demand-Pull Inflation.
 Monetarist’s argument:
Spending of excess cash balances causes price level to rise.
Price level will continue to rise until aggregate demand equals aggregate
supply.
 Keynesians argument:
Increase in aggregate demand i.e., increase in (C + I + G + NX ) causes
price level to rise.

17. Causes
2: Cost-Push Inflation.
 Raw materials.
 Increase in the price of petrol.
 Wage-push inflation or profit-push inflation.
 Fiscal policy changes.
 Inefficiency, corruption, mismanagement of the economy may also be
the other reasons. Thus, inflation is caused by the interplay of various
factors. A particular factor cannot be held responsible for any inflationary
price rise.

18. Effects
1. Effect on distribution of income and wealth:
 People gain during inflation at the
expense of others.
 Individuals gain more.
 some lose because prices rise more
rapidly than their incomes.

19. Effects
2. Effect on economic growth:
 An inflationary situation gives an incentive to businessmen to raise
prices of their products so as to earn higher volume of profit. Rising price
and rising profit encourage firms to
make larger investments.
 An increase in aggregate demand
will increase both prices and output.

20.  Source:
http://www.economicsdiscussion.net/inflation/inflation-types-
causes-and-effects-with-diagram/6401