ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Based on speed, there are 4 different types of inflation – hyperinflation, galloping, walking, and creeping.

Detailed explanation-2: -Important Terms related to Inflation Open inflation: A situation where price level rises without any price control measures by the government.

Detailed explanation-3: -Demand pull inflation arises when the aggregate demand becomes more than the aggregate supply in the economy. Cost pull inflation occurs when aggregate demand remains the same but there is a decline in aggregate supply due to external factors that cause rise in price levels.

Detailed explanation-4: -Consumers have more discretionary income to spend on goods and services. When that increases faster than supply, it creates inflation. For example, tax breaks for mortgage interest rates increased demand for housing. Government sponsorship of mortgage guarantors Fannie Mae and Freddie Mac also stimulated demand.