ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -As the printing presses sped up, prices rose faster, until these countries started to suffer from something called “hyperinflation”.

Detailed explanation-2: -The three types of Inflation are Demand-Pull, Cost-Push and Built-in inflation. Demand-pull Inflation: It occurs when the demand for goods or services is higher when compared to the production capacity. The difference between demand and supply (shortage) result in price appreciation.

Detailed explanation-3: -Based on speed, there are 4 different types of inflation – hyperinflation, galloping, walking, and creeping.

Detailed explanation-4: -The monetarist theory, as popularized by Milton Friedman, asserts that money supply is the primary factor in determining inflation/deflation in an economy. According to the theory, monetary policy is a much more effective tool than the fiscal policy for stimulating the economy or slowing down the rate of inflation.

Detailed explanation-5: -If a government prints money faster than the growth of real output it reduces the value of money and this invariably causes inflation. Governments often resort to printing money when they cannot finance their borrowing by selling bonds. This hyperinflation can be extremely damaging to an economy.