What is inflation, and what causes it?
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Inflation is a sustained rise in the general price level. Inflation can come from both the demand and the supply-side of an economy
Its causes are:
Inflation can arise from internal and external events
1). Some inflationary pressures direct from the domestic economy, for example the decisions of utility businesses providing electricity or gas or water on their tariffs for the year ahead, or the pricing strategies of the food retailers based on the strength of demand and competitive pressure in their markets.
2). A rise in the rate of VAT would also be a cause of increased domestic inflation in the short term because it increases a firm's production costs.
3). Inflation can also come from external sources, for example a sustained rise in the price of crude oil or other imported commodities, foodstuffs and beverages.
4). Fluctuations in the exchange rate can also affect inflation – for example a fall in the value of the pound against other currencies might cause higher import prices for items such as foodstuffs from Western Europe or technology supplies from the United States – which feeds through directly or indirectly into the consumer price index
Hope it helped
Its causes are:
Inflation can arise from internal and external events
1). Some inflationary pressures direct from the domestic economy, for example the decisions of utility businesses providing electricity or gas or water on their tariffs for the year ahead, or the pricing strategies of the food retailers based on the strength of demand and competitive pressure in their markets.
2). A rise in the rate of VAT would also be a cause of increased domestic inflation in the short term because it increases a firm's production costs.
3). Inflation can also come from external sources, for example a sustained rise in the price of crude oil or other imported commodities, foodstuffs and beverages.
4). Fluctuations in the exchange rate can also affect inflation – for example a fall in the value of the pound against other currencies might cause higher import prices for items such as foodstuffs from Western Europe or technology supplies from the United States – which feeds through directly or indirectly into the consumer price index
Hope it helped
Answered by
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Inflation:- A general increase in prices and fall in the purchasing value of money.
Causes of the inflation:- The main causes of inflation are either excess aggregate demand (economic growth too fast) or cost-push factors (supply-side factors).
1. Demand-pull inflation – aggregate demand growing faster than aggregate supply (growth too rapid)
2. Cost-push inflation – higher oil prices feeding through into higher costs
3. Devaluation – increasing the cost of imported goods, also boost domestic demand4. Rising wages – higher wages increase firms costs and increase consumers’ disposable income to spend more.
5. Expectations of inflation – causes workers to demand wage increases and firms to push up prices.
hope it helps you!
Causes of the inflation:- The main causes of inflation are either excess aggregate demand (economic growth too fast) or cost-push factors (supply-side factors).
1. Demand-pull inflation – aggregate demand growing faster than aggregate supply (growth too rapid)
2. Cost-push inflation – higher oil prices feeding through into higher costs
3. Devaluation – increasing the cost of imported goods, also boost domestic demand4. Rising wages – higher wages increase firms costs and increase consumers’ disposable income to spend more.
5. Expectations of inflation – causes workers to demand wage increases and firms to push up prices.
hope it helps you!
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Evajiju:
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