Question

Define inflation, explain the different types of inflation and discuss the curve of inflation.

which of them is or will more likely become a reality in our time of pandemic?

Answer 1

Inflation is the rate a price rises, and essentially how much the currency (as U.S. Dollar) is worth at a given moment with regards to purchasing. It is the steady increase in the price of goods and services over time. It devalues units of currency resulting in consequences like higher cost of living.

Two basic and main types of Inflation are :-

(1). Demand-Pull Inflation :- When demand for a good or service is greater than supply, allowing producers to raise prices.

(2). Cost-Push Inflation :- When the aggregate supply of goods and services decreases because of an increase in production costs.

Cost-Push Inflation is or will more likely to become a reality in our time of pandemic, because here cost of production goes up, reducing supply and pushing up prices for consumers (which are more likely to occur in reality in our time of pandemic).