• By Assad Halak
• 10, Mar 2025
• 10, Mar 2025
• Software

Inflation

Do you know what inflation is and what are its types??

Inflation occurs when the increase in production exceeds the aggregate demand

Types of inflation:

1- Stagflation: In periods of recession, effective demand decreases and the level of operation of the production apparatus decreases, so unemployment rates increase. If there is a complete or dominant monopoly, no one can force monopolistic companies to reduce the prices of their goods and services in the event of a recession, which leads to higher prices with higher unemployment rates.

2 -  Imported inflation: When the prices of imported goods rise for any reason, this increase is often reflected in local goods, which clearly affects those with limited incomes, who demand an increase in wages and salaries.

3- Suppressed inflation: This type of inflation often appears in countries that adopt a directed economy, where the state issues money without cover for the purpose of public spending of the state, which leads to an increase in prices as a result of the increase in demand for supply due to the abundance of cash, so the state resorts to intervention in order to control prices by setting quotas for goods and services for each individual, as if the state has thus suppressed (restricted) the gap between the greater demand and the lesser supply, which leads to the emergence of black markets.

4 - Runaway inflation: This type of inflation usually occurs at the beginning of the recovery phase or the transition phase from one economic system to another, or in the periods following wars, so this type of inflation is considered the worst type of inflation, as people lose confidence in the economic system.

5- Creeping inflation: It is normal inflation, but it occurs during a decline in production, as the prices of goods and services begin to rise, which causes fears among consumers that prices will continue to rise, so they resort to buying more goods and services than they need, and get rid of money, which results in creeping inflation that leads to curbing growth.

6-Normal inflation: When the population increases, their needs increase, so the state is forced to finance part of public spending by issuing money without cover, which leads to rising prices. This type of inflation is suffered by the vast majority of countries, so countries plan to organize families and limit births.

7 - Demand-pull inflation: It occurs when prices rise as a result of a large surplus in aggregate demand compared to aggregate supply "local and imported", and this may be temporary or may continue, such as the rise in the prices of toys and some food items on holidays or certain occasions (the beginning of the season) or tourism. In these cases, the increase in spending does not represent an increase in real production as much as it results in an increase in prices.

The most prominent features of the inflation phenomenon are:

1 -The decrease in the value of the currency against the prices of goods and services, which is expressed as "decreased purchasing power".

2- It is the result of multiple economic factors, which may be conflicting with each other, as inflation is a complex, compound and multidimensional phenomenon at the same time.

3- Resulting from the imbalance in price relations between the prices of goods and services on the one hand, and the prices of production elements (level of profits, wages, and product costs) on the other hand.