ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Creeping Inflation:This occurs when the rise in price is very slow. A sustained annual rise in prices of less than 3 per cent per annum falls under this category. Such an increase in prices is regarded safe and essential for economic growth.

Detailed explanation-2: -The redistribution effect of inflation Lenders are hurt by unanticipated inflation because the money they get paid back has less purchasing power than the money they loaned out. Borrowers benefit from unanticipated inflation because the money they pay back is worth less than the money they borrowed.

Detailed explanation-3: -Expected inflation is reflected in the terms of loan agreements. Unexpected inflation leads to a lower real interest rate and thus a redistribution from the lender to the borrower.

Detailed explanation-4: -An example of unanticipated inflation is when a country experiences inflation because of natural disasters or economic instability. The country will experience higher prices for goods and services, which people may find difficult to afford.