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Different Types of Inflation as per Rise in Price Livel?

Inflation are divided into several types based on "Rise in Price Levels".

(i) Credit Inflation
Increase in price levels due to rapid increase of bank credit or money supply is called as Credit Inflation.  It is also known as money Inflation.

(ii)  Deficit Inflation
Increase in prices due to heavy deficits in government budgets(Financially), creation of new money, increase in purchasing power is called Deficit-Induced Inflation.  Because of this inflation, inflationary spiral is developed when produced goods fail to move with money spent.

(iii) Scarcity Inflation
Scarcity Inflation is caused when there are no sufficient goods and they are artificially created through temporary activities by traders and speculators.  This leads to rise in prices as black-marketing will be involved.

(iv) Profit Inflation(Keynes)
The consumption of goods with prices related to the investment function results in increased savings.  Investment results in profits and investors are gained due to inflation by distribution.  So, due to inflation entrepreneurs are gained when they have invested more by borrowing at high interest rates.  As a result savings rises and economy gains high income.  Through increase of prices, balance between money income and real income are achieved.

(v) Foreign-trade Induced Inflation
There are two types of foreign-trade induced inflation.

(a) Export-boom Inflation
When a country exporting considerable components it may experience an increased demand and if the supple is short in domestic market, the demand for goods rise rapidly resulting in inflation in domestic country.

(b) Import Price-hike Inflation
If a country import goods from abroad and if the prices of the components of these goods increases in abroad the prices of products in domestic country using these components will increase.  This inflation is called import Price Hike Inflation.

(vi) Cost Inflation
When income, ie., the wage rate increases than production ie., the rise in cost factor is called Cost Inflation.  When workers demand high rates due to rise in cost of living index, the cost of production increases.  This may lead to higher levels which is called Cost Inflation.

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