Inflation is a process characterized by constant price increases. As a result, money begins to depreciate in relation to assets. Inflation depends on a number of factors. But it must be remembered that not every change in value is her.
Let us consider in detail what inflation and its types are. This process manifests itself as a sustainable phenomenon. In the market you can observe a constant rise in prices or temporary jumps. In the first case, it is just about inflation, and in the second about seasonal changes in value.
With inflation, the general price index increases, and not the value of all goods as a whole. At some point in time, some products can go up in price, others become cheaper, and still others remain at the same level. But at the same time, if the general index, that is, the GDP deflator, shows growth, then we are talking about inflation. In economics, there is the concept of "deflation" - with it there is a decrease in the price level.
So, we continue to consider what inflation and its types are. This economic process leads to the fact that the purchasing power of money is sharply reduced. People over time for the same amount can buy less units of goods.
The concept and types of inflation are one of the main sections in economic theory. She considers the classification of this process. So, according to the growth rate, inflation is divided into moderate, galloping, high and hyperinflation. We will study each of them in more detail.
Moderate inflation is characteristic of the modern economy. It is observed in most parts of the world. Moderate inflation is expressed by a slight increase in the price level per year. Its value is on average 3-5%. The maximum allowable growth is 10%. This type of inflation is an incentive to expand production.
We continue to study what inflation and its types are. Galloping is also measured in percent for one year. But, unlike moderate inflation, it is expressed in double digits, and is a serious problem for the economies of developed countries.
High inflation is expressed in percent per month. In the same year, it amounts to rather high growth rates. Figures may exceed 200%. A similar type of inflation can be observed in countries with economies in transition and in developing countries.
Hyperinflation has tremendous growth rates. Measured by interest per day or per week. For a month, price increases can be 50%, and up to 1000% per year. Such vivid cases of hyperinflation are known in history. Germany, January 1922 - December 1924. The increase in the price level amounted to 1012%. Hungary in August 1945 - July 1946 suffered from hyperinflation (rising prices above 1027%).
So, we examined the concept of "inflation" and its types. But this process can also be classified depending on the form of manifestation. Distinguish between hidden and explicit inflation. The first type is associated with the actions of the state. It initially sets the price level below equilibrium. In this regard, there is a shortage of goods in the market. Explicit inflation is observed in rising price levels. We can observe it constantly in the form of an increase in the cost of goods and services.
What are the causes and types of inflation? We considered the main classification, but in connection with which there is a constant increase in prices, we will find out below.
The constant increase in the mass of money in circulation is associated with a number of reasons:
- the budget deficit forces the inclusion of a "printing press";
- the state is pursuing an expansionist financial policy;
- loans are widely used;
- debt instruments are means of payment;
- increased demand for goods and services compared with the previous period;
- increased production costs;
- other reasons.
Inflation is inevitable in the market. It is important that it does not go into an uncontrollable process. Inflation is monitored mainly by state governments.