Inflation and various terms related to it

Inflation refers to the substantial rise in the price of a commodity in the economy over a stipulated period of time. This results in the fall of value of money. That is the purchasing power of money is reduced.

Deflation It is a general decline in prices of commodities which is often caused by the reduction in supply of the money. It can also be caused by a decrease in government, personal or investment spending. It is opposite of Inflation.

Disinflation It is the slowing down the rate of inflation. Which means there is inflation in the market but is reducing gradually.

Some Important Terms of Inflation:-

1. Stagflation- It refers to a situation with slow economic growth and high unemployment leads to stagnation and it is accompanied by inflation.

2. Skewflation- It refers to general price rise over a sustained period of time.

3. Galloping Inflation- Which means that the Inflation rates are very high running in double or even triple digits.

4. Hyper Inflation- This refers to a large and accelerating Inflation when prices rise of more than >50% of a commodity in a month.

5. Creeping Inflation- It refers to a gradual rise in price over a long period of time. This kind of inflation is good for economy. It is also mild inflation.

6. Bottleneck Inflation- Also referred to as a structural inflation. It occurs when supply falls drastically whereas the demand remains as it is.

7. Inflation tax- Which refers to a penalty of holding cash during high inflation and it results into erosion at the value of money.

8. Shrinkflation- When the companies in order to meet the required rising inflation reduce their quantity of products then it is known as Shrinkflation.

9. Skimpflation- When the companies in order to meet the required rising inflation reduce their quality of products then it is known as Skimpflation.

Types of Inflation

• Demand pull- Inflation

• Cost- push Inflation

A Philips Curve is a curve which establishes an inverse relation between Inflation and Unemployment. According to the graph as unemployment decreases we can see a rise in Inflation.