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D. INFLATION 1.
Definition of Inflation
The increase in the price of goods can be temporary or ongoing. When the increase lasts for a long time and occurs in almost all goods and services,
then this phenomenon is called inflation. So, the price increase on one or two types of goods cannot be categorized as inflation. Soesastro, 2005:56
Thus, inflation inflation is the increase in the price of goods that are common and persistent. The opposite of inflation is deflation deflation, a
condition in which the price level has decreased continuously.
2. Types of Inflation
Types of inflation can we differentiate based on severity, the cause and origin based on the occurrence. Prathama, 2008:367
a. Inflation Based on severity Low inflation. Inflation is said to be low if the price goes very slowly
with a small percentage, which is below 10 a year. 1 Low inflation. Inflation is said to be low if the price goes very slowly
with a small percentage, which is below 10 a year. 2 Inflation was. A country is said to experience a moderate inflation, if
the percentage rate of inflation of 10 - 30 a year. 3 High inflation. Inflation is said to be high if the rate of inflation
ranging from 30 - 100 a year. 4 Hyperinflation. Hyperinflation could occur if the inflation rate of
over 100 a year. If a country is experiencing hyperinflation, the
16 people no longer have confidence in money; they prefer to exchange
it for a particular item. b. Under Inflation Causes
Inflation can also be distinguished by its cause, namely: 1 Demand-pull inflation
2 Cost-push inflation c. Originally Inflation Based
Based on the origin of inflation can be divided into the following. 1 Inflation due to the budget deficit. This type of inflation occurs as a
result of growth in the money supply exceeds the demand for money. 2 Imported inflation. Imported inflation is inflation that occurred in a
country, for example some goods abroad is a factor of production in a country, price increases, then the price increases result in increased
prices of goods in the country
3. Theories of Inflation
a. Kunatitas theory Irving Fisher According to the quantity theory, if the money supply increases, the
general price level will also rise. A direct relationship between price and quantity of money as represented by the simple quantity theory of money
can be used to explain the inflation situation. Boediono, 1985:169 b. Theory Keynes
According to Keynes, inflation occurs because there are some people who want to live outside the boundaries of its economic capabilities. Inflation
process is a process of struggle for sustenance section between social
17 groups who want a bigger share of that could be provided by the
community. Boediono, 1985:172 c. Theory Structuralisms
This theory gives great attention to the structure of the economy in developing countries. Inflation in developing countries is mainly caused
by factors of economic structure. According to this theory, the conditions of the economic structure of developing countries which can lead to
inflation are: 1 Acceptance inelasticity Exports
2 Inelasticity offer or Domestic Food Production
4. Inflation Causes
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