How is Inflation Classified on the Basis of Speed?

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On the basis of speed, inflation can be classified as (a) creeping inflation, (b) walking inflation, (c) running inflation, and (d) galloping or hyperinflation.

1. Creeping Inflation:

It is the mildest form of inflation. It is generally regarded as conducive to economic development because it keeps the economy away from stagnation. But, some economists consider creeping inflation as potentially dangerous.

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They are of the view that, if not properly controlled in time, creeping inflation may assume alarming proportions. Under creep­ing inflation, prices rise about 2 per cent annually.

2. Walking Inflation:

Walking inflation occurs when the price rise becomes more marked as compared to creeping inflation. Under walking inflation, prices rise approximately by 5 per cent annually.

3. Running Inflation:

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Under running inflation, the prices increase at a still faster rate. The price rise may be about 10 per cent per annum.

4. Galloping or Hyper-Inflation:

This is the last stage of inflation which starts after the level of full employment is reached. Keynes considers this type of inflation as the true inflation. Under the galloping inflation, the prices rise every moment and there is no upper limit to the price rise.

The classical examples of hyper-inflation are (a) the Great Infla­tion of Germany after the World War I, and (b) the Great Inflation of China after the World War II.

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The classification of inflation on the basis of speed is represented in Figure 1. In the first period of 25 years, the price level has gone up by 50 percent.

The OA line represents creeping inflation. In the second period of 10 years prices have risen by 50 per cent; the AB line shows walking inflation. In the third period of 5 years, the prices have increased by 50 per cent; the BC line denotes running inflation.

In the fourth period of 2 years, the prices have risen by 50 per cent; the CD line represents galloping inflation.

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