What are the two types of inflation? How is inflation calculated? Of these two,

Question

What are the two types of inflation? How is inflation calculated? Of these two, which is one is usually the cause behind rising prices? What empirical evidence can be provided for the previous conclusion? What are the two types of deflation? Which is worse for the macro-economy, inflation or deflation? Explain.  

Is there a trade-off between inflation and unemployment? Why or why not? What are the orthodox and heterodox assumptions behind the equation of exchange (MV = PY) and the consequences and outcomes of these assumptions?Your answer should also include the direction of causation. Of the two approaches which is endogenous and which is exogenous? Explain what this means.

What comprises the actual money supply and what does this have to do with inflation/deflation?  What entity actually creates the majority of the money supply?

Explanation / Answer

Inflation could be understood as the rate of change in price levl from a period of time to another period of time. It generraly refers to the rate of increase in price level of an economy during two period of time.

Inflation could be of two types:

Inflation is calculated as an annual percentage increase in price level. Asinflation rises, every dollar we own buys a smaller percentage of a good or service.

Usually it is demand pull inflation that happens most of the times. Growing increse in world popoulation and income, demand increases to which AD increase from As creating inflation.

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