What Causes Inflation

 

Inflation can arise from several factors. Here are the main causes:

1. Demand-Pull Inflation: When aggregate demand grows faster than aggregate supply, prices rise due to increased demand1.
2. Cost-Push Inflation: Higher production costs, such as rising raw material or labor expenses, can lead to inflation.
3. Inflation Expectations: If people expect prices to rise, they may demand higher wages and set higher prices, creating a self-fulfilling cycle2.

Understanding these dynamics helps us navigate economic changes. 🌟