Question

Based upon the material in the text (and you may want to do a quick Internet search) provide your opinion (and basis for your opinion) on whether inflation is a current problem for the economy. Discuss your opinion on whether you feel inflation may be a problem over the next 5 years. Describe the types of inflation and how they might occur in the future.

Answer 1

Inflation is not the current problem for the economy as the rate of inflation is 1.9% which is considered to be healthy. Inflation will be a problem if it exceeds 2% mark in next 5 years. But as the data suggests it has not gone a lot above that in past years.

Types of inflation

1) creeping- when prices rise 3% or less in a financial year. This is usual rate of inflation which is considered to be healthy.

2) walking - when price rise is between 3-10% in a financial year. This occurs when people start purchasing more than they need

3) galloping - when price rise more than 10% in an year. This occurs when people's income can't keep up with the prices.

4) hyperinflation - when prices rise more than 50% in a month. This occurs when govt orders to print money.