On the basis of time, inflation may be classified into (a) peacetime inflation, (b) war-time inflation and (c) post-war inflation.
1. Peace-Time Inflation:
By peace-time inflation we mean the rise in prices during normal period of peace. This type of inflation occurs when, in a less-developed economy, the government increases expenditure on development projects which normally have longer gestation periods.
It means a gap arises between the generation of money income and the final availability of goods, this leads to a rise in prices.
2. War-Time Inflation:
War-time inflation occurs during a period of war. During war time, unproductive government expenditure increases and the prices rise because the increase in output does not keep pace with the expansion of expenditure.
3. Post-War Inflation:
Post-war inflation occurs after the end of the war when the pent-up demand finds open expression.
Heavy taxes, which were imposed on the people during war time, arc withdrawn during postwar period. As a result the disposable income of the people abruptly increases without increase in the output. Hence the prices shoot up.