Question

classification on the basis of process of rise in price...

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Answer 1

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There is no one cause of inflation in the economy. Economists have hypothesized a few theories, that in some combination may cause the overall inflation in a given economy.

Demand-Pull Theory:

As per this theory, inflation is caused due to the general increase in the demand for goods and service. So when demand outgrows the supply, the prices will increase.

Cost-Push Theory:

As the production costs of goods and services increase, then the companies are forced to increase the prices of the goods and services. This causes inflation in the economy.

Monetary Inflation Theory:

According to this theory, the increase in prices is due to the excessive supply of money in the market. This causes the value of money to drop, and the prices go up.

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