More Information On Inflation

More Information On Inflation

Inflation occurs when prices of services or goods increases.  Inflation affects all the activities including trading, economic activities, business, etc. Inflation is an important factor that needs to be considered while you take part in trading. Many people ignore this fact and end up losing money in the future. If you don’t have time to analyze all the aspects before trading, then it’s best for you to opt for automated trading robots to conduct trading for you.

Inflation is broadly classified into 4 types: hyperinflation, galloping, walking and creeping. All there are specific kinds of inflations known as wage inflation and asset inflation.

Types of inflation’

Hyperinflation- This situation arises when the prices skyrocket beyond 50% in a month.  It occurs very rarely. It has happened only those times when the government has printed additional money in order to make payment during war times.

Galloping inflation- Whenever the inflations go beyond the 10%, it creates havoc on the country’s economy.   In this situation, the money loses its value quickly that the employees and business could not keep pace with prices and costs. The foreign investors will avoid conducting business with the country. The economy would become unstable and the government leadership team loses its credibility. At all costs, the galloping inflation should be prevented.

Walking inflation- This is pernicious or strong inflation that keeps the rate of inflation between 3 to 10% a year. It will heat up the growth of the economy too fast which hurts the economy. People will begin to purchase the goods more than they require just to avoid the price rise in the future. This creates more demand which the supplier will not be able to keep up.   As a result, the services and the goods will be priced more which will be unaffordable by people.

Creeping inflation- Mild or creeping inflation happens when the rise in price is less than 3 %. The economic growth gets benefitted when the price rise is 2% or less.  This mild inflation will make the customers expect that the price will keep rising up and boosts the demand. The mild inflation helps in driving the expansion of the economy.

Wage inflation- This inflation occurs when the workers pay will rise faster than the rise in the cost of living. It happens when there is a shortage of employees and the unions negotiate higher pay.

Asset inflation- Asset inflation or asset bubble occurs in one of the asset class like oil, gold, and housing. If it goes unchecked it can result in damaging the economy.

 

 

 

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