Top reasons that causes inflation in an economy
Hi there, let's discuss about the possible types and reasons those cause inflation in an economy.
We already know that 'Inflation' is a sustained increase in the general price level of goods and services in an economy over a period of time. And behind there are several possible reasons that can cause it in an economy, such as:
Demand-pull inflation:
It occurs when there is an increase in demand for goods and services, which exceeds the supply. This results in higher prices as businesses try to increase their profits by raising the prices of their products, causing an increase in price levels.
Cost-push inflation:
Cost-push inflation occurs when the cost of production increases, such as the cost of raw materials or wages. This results in businesses passing on the increased costs to consumers in the form of higher prices.
Monetary inflation:
This occurs when there is an increase in the money supply(printing more and more money), which results in a reduction in the value of money. This can lead to higher prices as people try to spend their money before its value decreases further.
Exchange rate inflation:
This occurs when the local currency is deprecated relative to foreign currencies. This makes imports more expensive and can result in higher prices for imported goods.
Structural inflation:
Structural inflation occurs when there are supply-side constraints in the economy, such as a lack of infrastructure or skilled workers, which limit the ability of businesses to meet demand. This results in higher prices as firms cannot increase production to meet demand.
Therefore, in an economy, these are some of the possible reasons that can cause inflation, but the specific causes can vary depending on the particular circumstances and conditions of the economy. Sometimes the situations are created automatically but the situations are also created by powerful people to control the economy and make personal benefits from it.
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@shahriar33
Good information. One thing that people should know is that a lot of the correct reasons for inflation are hidden from the public from governments. The system is rigged and they keep in not transparent on purpose sometimes referring to National Security reasons. People must insist on disclosure and or smaller government.
Exactly.
Thanka,sir
Sir,jee thanks.
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