| Definition |
General and steady increase in the price level of goods and services over time. |
Extremely rapid and out-of-control rise in prices, usually exceeding 50% per month. |
| Rate |
Typically ranges from 1% to 10% annually in most economies. |
Can exceed 50% per month or thousands/millions percent annually. |
| Acceptability |
Moderate inflation is considered normal and often beneficial for economic growth. |
Hyperinflation is economically destructive and unsustainable. |
| Causes |
Increased demand, higher production costs, expansionary monetary policy. |
Excessive money printing, loss of confidence in the currency, political instability. |
| Economic Impact |
Gradually erodes purchasing power and may affect savings and investment behavior. |
Completely destroys currency value, halts savings, disrupts commerce and wages. |
| Monetary Policy Role |
Central banks can manage inflation with interest rates and liquidity tools. |
Monetary tools are often ineffective during hyperinflation due to collapse of trust. |
| Purchasing Power |
Declines slowly over time, allowing for adjustment by consumers. |
Purchasing power collapses quickly; money may become worthless within days. |
| Wage Response |
Wages may adjust gradually but often lag behind inflation. |
Wages cannot keep up with price increases, causing real income to drop sharply. |
| Currency Confidence |
Still retains trust in currency as a medium of exchange. |
Loss of confidence leads to hoarding, barter trade, or use of foreign currencies. |
| Historical Examples |
India (5-8% annually), U.S. (2-3% target range). |
Zimbabwe (2000s), Germany (Weimar Republic), Venezuela (2010s). |
| Asset Behavior |
Real estate, gold, and equities may rise moderately with inflation. |
People rush to buy physical assets (gold, food, real estate) to preserve value. |
| Price Doubling Time |
Could take several years for prices to double. |
Prices may double within days or weeks. |
| Investment Climate |
Still viable for long-term investments and planning. |
Investment collapses; capital flight becomes common. |
| Social Impact |
Moderate inconvenience; may cause cost-of-living protests. |
Severe; leads to poverty, riots, looting, and regime changes. |
| Government Response |
Policy adjustments, interest rate hikes, and fiscal tightening. |
Often chaotic; reforms may include currency redenomination or foreign currency adoption. |
| Tax Collection |
Still functional with normal lags. |
Becomes ineffective; real value of collected taxes erodes quickly. |
| Money Supply |
Managed growth in money supply. |
Uncontrolled and exponential expansion of money supply. |
| Debt Impact |
Reduces real burden of fixed-interest debt over time. |
Destroys debt obligations but also investor confidence. |
| Duration |
Can persist over years with manageable consequences. |
Usually short-lived due to collapse and forced reforms. |
| Public Behavior |
Some shift in consumption and saving habits. |
Mass panic buying, hoarding, black markets flourish. |
Inflation vs Hyperinflation