Short note on Inflation
Inflation means abnormal increase of the currency.
There are 4 concepts of inflation which are given below:
- Cost-push Inflation:
Ø Some factors increasing the cost to manufacture a product or offer a service is called cost-push inflation.
Ø For example- An automobile manufacturer increases the price of cars because labour and material cost more.
Ø Another example- A major reason for increasing new home price in recent years has been the increasing the prices of labour, bricks, concrete, metal, cement, construction loans and government permits.
- Demand-pull Inflation:
Ø When buyers bid against each other to buy something that has been offered for sale is called demand-pull inflation.
Ø For example- 3 buyers bid for a single available residence. The actual price of the residence is Tk. 10 lakh. But when competition arises among the buyers, then price of the residence upward, suppose 12 lakh, 13 lakh, 14 lakh. This type of inflation called demand-pull inflation.
- Monetary Inflation:
Ø Demand-pull inflation is basically the result of too goods money chasing too few goods.
Ø On the local scale it can result from a certain neighborhood suddenly becoming popular among buyers.
Ø On the national scale, this form of inflation is called monetary inflation.
Ø As it draws its strength from the creation of excessive amounts of money by Government.
Ø For example-To solve the national problem, need a lot of money.
Ø So Government provides money to solve the problem.
Ø But goods and services were not increased parallel. So that monetary inflation will arise.
- Real cost Inflation:
Ø Another factor in higher prices in real-cost inflation.
Ø This type of inflation creates by the increased effort necessary produce the same quantity of a good or services.
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