2. Types of Inflation (on the basis of rate of inflation)

Creeping Inflation occurs when the inflation rate is in the range of 1% to 5%. Such inflation erodes the purchasing power of money, but is referred to as manageable and sometimes inevitable in a growing economy.

Trotting Inflation on the other hand lies in the range of 5% to 10%, which if not controlled properly may lead to “galloping inflation” at a rate of 10% to 20% annually. This galloping inflation may worsen into “runaway inflation” too.

Hyper Inflation: This form of inflation is out of control, which might have the annual rate in million or even trillion. In such inflation not only the range of increase is very large, but the increase takes place in a very short span of time, prices shoot up overnight. It rapidly reduces the value of currency to the extent that government thinks to adopt a new currency. One of the most famous examples of hyperinflation occurred in Germany between January 1922 and November 1923. Among the recent examples, the one experienced in Zimbabwe in 2008 is a prominent one.