Economics [1 Mark Question Answer]

When prices rise at a mild rate like that of snail or creeper (around 2% per annum) it is known as creeping inflation.

Inflation refers to a state of rise in the general price level.

Demand pull inflation refers to a situation in which prices rise because the demand for goods and services exceeds their total available supply at current prices. It is also caused by increase in money supply.

Fixed-income groups like pensioners suffer the most during inflation because increase in their incomes does not keep pace with the rising prices, leading to a fall in their real income.

Businessmen (entrepreneurs, traders, producers etc.) tend to gain during inflation. It is because prices of their inventories go up thereby increasing their profits.

Two factors causing cost push Inflation
(i) Cost push inflation may be caused due to an increase in wage cost.
(ii) Increase in price of basic raw-materials causes cost push inflation.

When prices rises due to rise in cost of production, it is called cost push inflation.

When prices rise very fast at double or triple digit rates from more than 20% to 100% per annum or more it called hyper inflation.

When prices rise rapidly at a rate or speed of around 10 to 20 percent per annum, is called running inflation.