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Answer:
Inflation means there is a sustained increase in the price level. The main causes of inflation are either excess aggregate demand (AD) (economic growth too fast) or cost push factors (supply-side factors).
Explanation:
There are two main causes of inflation: Demand-pull and Cost-push. Both are responsible for a general rise in prices in an economy. But they work differently. Demand-pull conditions occur when demand from consumers pulls prices up.
Answer:
The main causes of inflation are demand-pull inflation, rising wages, etc. Reasons for inflation are mentioned below:
Demand-pull inflation – In an aggregate demand growing faster than aggregate supply growth of rapid.
Rising wages – higher wages increase a firm's costs and increase the consumers’ disposable income to spend more income.
Expectations of inflation – High inflation expectations cause workers to demand wage increases and firms to push up prices. But they work differently.
Cost-push inflation – For some examples, higher oil prices feed through to higher costs.
Devaluation – increasing the cost of imported goods, and also the boost to domestic demand.
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