Takes place when the prices of goods and services rise at a single digit rate annually. Moderate inflation is also termed as creeping inflation. When an economy passes through moderate inflation, the prices of goods and services increase but at moderate rate.However, the rate of increase in prices under this type of inflation varies from country to country. Moderate inflation is a type of inflation that can be anticipated; therefore, individuals hold money as a store of value.
Refers to a type of inflation that occurs when the prices of goods and services increase at two-digit or three-digit rate per annum. Galloping inflation is also known as jumping inflation. In the words of Baumol and Blinder, “Galloping inflation refers to an inflation that proceeds at an exceptionally high.”
Galloping inflation has adverse effect on middle and low income groups in the society. As a result, individuals are not able to save money for future. This kind of situation requires strict measures to control inflation.
Occurs when the rate of increase in prices is extremely high or out of control. In other words, hyperinflation takes place when the increase in prices is more than three-digit rate annually. Hyperinflation takes place when there is an unrestricted increase in the supply of money in the market.
This leads to a situation of imbalance in the supply and demand of money. Consequently, money loses its real worth at a rapid rate, which, in turn, leads to an increase in prices. The economic condition of Germany in 1922 and 1923 is the best example of hyperinflation. Apart from this, in 1989 and 1991, Argentina, Brazil, and Zimbabwe were also striving hard to overcome hyperinflation.