1-Demand-pull inflation – aggregate demand growing faster than aggregate supply (growth too rapid) 2-Cost-push inflation – For example, higher oil prices feeding through into higher costs. Inflation is a measure of the rate of rising prices of goods and services in an economy. Also, business owners can deliberately withhold supplies from the market, allowing prices to rise to a favorable level. However, these tax rises are likely to be one-off increases. In other words, the value of one’s sav­ings decline if the interest rate falls short of inflation rate. G. Ackley defined inflation as ‘a persistent and appreciable rise in the general level or aver­age of prices’. Finally, real value of tax revenue also declines under the impact of hyperinfla­tion. This causes prices to go higher and creates inflation. Aggregate demand may rise if there is an increase In brief, increase in aggregate demand i.e., in­crease in (C + I + G + X – M) causes price level to rise. That is why peo­ple use their money balances in buying real estate, gold, jewellery, etc. But they work differently. However, no such hard and fast gener­alisation can be made.

For example, a  Rising wages – higher wages increase firms costs and increase consumers’ disposable income to spend more. 4.3, aggregate demand curve is negative sloping while aggregate supply curve before the full employment stage is positive sloping and becomes vertical after the full employ­ment stage is reached. To some, a creeping or mild inflation is one when annual price rise varies between 2 p.c. This leads to an upward pres­sure on cost of production.Not only this, CPI is often imported from outside the economy. Corporations also raise prices freely when the item for sale is something consumers need for everyday existence, such as oil and gas. But the situation of monetary expansion or budget deficit may not cause price level to rise. Rising wages lead to rising costs. Suppose, in December 2007, the consumer price index was 193.6 and, in December 2008, it was 223.8. For in­stance, by an administrative order the govern­ment may hike the price of petrol or diesel or freight rate. However, if in an inflation-ridden economy creditors chronically loose, it is wise not to advance loans or to shut down business.Never does it happen. Prices of commodities are thereby increased.A wage-price spiral comes into opera­tion. Demand-Pull Inflation, Cost-push inflation, Supply-side inflation Open Inflation, Repressed Inflation, Hyper-Inflation, are the different types of inflation.Increase in public spending, hoarding, tax reductions, price rise in international markets are the causes of inflation. One of the important causes of price rise is the rise in price of raw materials. Mild inflation has an encouraging effect on national output. She writes about the U.S. Economy for The Balance.3 Ways Monetary and Fiscal Policy Change Business Cycle PhasesHow QE Allows Central Banks to Create Massive Amounts of MoneyDoes the Federal Reserve or U.S. Treasury Print Money? To meet this gap, the government may ask the central bank to print additional money. Inflation and unemployment are the two most talked-about words in the contemporary society.These two are the big problems that plague all the economies.Almost everyone is sure that he knows what inflation exactly is, but it remains a source of great deal of confu­sion because it is difficult to define it unam­biguously.Inflation is often defined in terms of its supposed causes. One of the important causes of price rise is the rise in price of raw materials. Three main causes of inflation derived by economists are as follows: 1.

If In other words, inflation is a state of rising prices, but not high prices.It is not high prices but rising price level that con­stitute inflation.

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