Types of Inflation Flashcards
1
Q
what are the main 2 types of inflation?
A
Demand Pull inflation
Cost Push inflation
2
Q
what is demand pull inflation?
A
it occurs when total demand increases faster than supply
“too much money chasing too few goods”
3
Q
characteristics of demand pull inflation?
A
INJECTIONS increase in households consumption increase in investment spending increase in govt spending increase in exports earnings
4
Q
who supports demand pull inflation?
A
Keynesians and Monetarists
5
Q
what is cost push inflation?
A
it occurs when prices increase due to increase in production costs
“Mark up inflation”
6
Q
characteristics of cost push inflation?
A
LEAKAGES increase in salaries tax increase import costs increase exchange rate depreciates
7
Q
example of a combination of demand and cost inflation?
A
effect of the 2011 Japanese tsunami
8
Q
what are the other types of inflation?
A
normal inflation creeping inflation (wages can't keep up) hyperinflation (runaway) dangerous stagflation (unemployment) deflation (opposite) disinflation (declining inflation)
