Balanced Inflation
Balanced vs unbalanced inflation and relative-price distortion are covered alongside the full inflation syllabus in the Economics Made Simple Complete Bundle — textbook, practice questions with mark schemes, flashcards and 100 case studies.
Consider its title “Balanced”, a type of inflation when all the prices increases proportionately. So its more like an increase in the prices of all of the Products rather just a few. This kind of inflation manage your money matters accordingly as you know that the cost of all products are increasing.
Unbalanced Inflation
On the other hand Unbalanced Inflation has its effects over few goods only. Which forces people to focus or spend more time in managing their money that leads to inefficiency in handling money matters. Because being informed and aware about relative prices is emphasized in business, an unbalanced Inflation distorts such decision making and information.
Shoe Leather Cost Concept
A shoe leather concept refers to the amount of time and effort you consume to counter effect the impact of Inflation like holding less amount of cash and having more trips to bank. The word SHOE LEATHER comes from the notion that more trips are required to go to the bank and have cash again and again to spend it and leads to wearing out of Shoes more quickly. This marginal time is sacrificed (Opportunity cost of time and effort, energy) as a cost for reducing the amount of money on hand compared to less or no inflation. We can relate this concept in a situation of Unbalanced information.
Conclusion
By going through Anticipated, Unanticipated, Balanced and Unbalanced Inflation , the most damaging is the Unanticipated and Unbalanced Inflation which leads us to the conclusion that forecast and prediction of rising or lowering prices is of great significance for a sustained Economy.
