Q. Which of the following is/are type/types of inflation?
1.Low inflation
2.Galloping inflation
3.Hyper inflation
Choose the correct answer from below given codes:

[A] 1 only

[B] 1 and 2 only

[C] 2 and 3 only

[D] 1, 2 and 3

Answer: D

Explanation: Depending upon the range of increase, and its severity, inflation may be classified into three broad categories.

  • Low Inflation: Such inflation is slow and on predictable lines, which might be called small or gradual. This is a comparative term which puts it opposite to the faster, bigger and unpredictable inflations. Low inflation takes place in a longer period and the range of increase is usually in ‘single digit’. Such inflation has also been called as ‘creeping inflation’. We may take an example of the monthly inflation rate of a country for six months being 2.3 per cent, 2.6 per cent, 2.7 per cent, 2.9 per cent, 3.1 per cent and 3.4 per cent. Here the range of change is of 1.1 per cent and over a period of six months.
  • Galloping Inflation: This is a ‘very high inflation’ running in the range of double-digit or triple digit (i.e., 20 per cent, 100 per cent or 200 per cent in a year). In the decades of 1970s and 1980s, many Latin American countries such as Argentina, Chile and Brazil had such rates of inflation—in the range of 50 to 700 per cent. The Russian economy did show such inflation after the disintegration of the ex-USSR in the late 1980s. Contemporary journalism has given some other names to this inflation —hopping inflation, jumping inflation and running or runaway inflation.
  • Hyperinflation: This form of inflation is ‘large and accelerating’ which might have the annual rates in million or even trillion. In such inflation not only the range of increase is very large, but the increase takes place in a very short span of time, prices shoot up overnight. The best example of hyperinflation that economists cite is of Germany after the First World War—in early 1920s. At the end of 1923, prices were 36 billion times higher than two years earlier. This inflation was so severe that paper German currencies (the Deutsche Mark) were more valuable as stove fuel than as actual money. Some recent examples of hyperinflation had been the Bolivian inflation of mid-1985 (24,000 per cent per annum) and the Yugoslavian inflation of 1993 (20 per cent per day).

Source: TMH Ramesh Singh