Name:

Anam Ansar
CMS:
403927
Class:
BBA 2ND SEMESTER
Submitted to:
Mam Asma
MACROECONOMICS
INFLATION:
Inflation is a quantitative measure of the rate at which the average price level
of a basket of selected goods and services in an economy increases over a period of
time. It is the constant rise in the general level of prices where a unit of currency buys
less than it did in prior periods. Often expressed as a percentage, inflation indicates
a decrease in the purchasing power of a nation’s currency.

TYPES OF INFLATION:
1. Demand-pull inflation:
This occurs when AD increases at a faster rate than AS.
Demand pull inflation will typically occur when the economy is growing faster
than the long run trend rate of growth. If demand exceeds supply, firms will
respond by pushing up prices.
2. Cost-push inflation:
This occurs when there is an increase in the cost of production for
firms causing aggregate supply to shift to the left. Cost-push inflation could be
caused by rising energy and commodity prices. See also: Cost Push Inflation

The types of inflation is based upon different factors:

Coverage or scope:
 Comprehensive or Economy-Wide Inflation, and
 Sporadic Inflation.
2) Time of occurrence:
 War-Time Inflation,
 Post-War Inflation, and
 Peace-Time Inflation.
3) Government's reaction or control :
 Open Inflation
  Suppressed or Repressed Inflation.
4) Rising prices:
 Creeping, Mild or Low Inflation,
 Chronic or Secular Inflation,
 Walking or Trotting Inflation,
 Moderate Inflation,
 Running Inflation,
 Galloping or Jumping Inflation
 Hyperinflation.
5) Different causes:
 Deficit Inflation,
 Credit Inflation,
 Scarcity Inflation,
 Profit Inflation,
 Pricing Power, Administered Price or Oligopolistic Inflation,
 Tax Inflation,
 Wage Inflation,
 Build-In Inflation,
 Development Inflation,
 Fiscal Inflation,
 Population Inflation,
 Foreign Trade Induced Inflation:
i. Export-Boom Inflation, and
ii. Import Price-Hike Inflation.
 Export-Boom Inflation,
 Import Price-Hike Inflation,
 Sectoral Inflation,
 Demand-Pull or Excess Demand Inflation
 Cost-Push (Supply-side) Inflation.
6) Expectation or predictability:
 Anticipated or Expected Inflation
 Unanticipated or Unexpected Inflation.
Relation between Inflation & unemployment:
The relationship between inflation and unemployment has traditionally been
an inverse correlation. If we use wage inflation, or the rate of change in
wages, as a proxy for inflation in the economy, when unemployment is high,
the number of people looking for work significantly exceeds the number of
jobs available. In other words, the supply of labor is greater than the demand
for it. With so many workers available, there's little need for employers to "bid"
for the services of employees by paying them higher wages. In times of high
unemployment, wages typically remain stagnant, and wage inflation (or rising
wages) is non-existent.

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