When inflation was high also the recession was high how
these two contradictory things occur at a same time
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Answer Posted / giri
Inflation is caused by two reasons :-
1) Demand Pull Inflation
2) Cost Push Inflation
When cost push inflation occurs then the cost of the
commodoties rised because of the increase in the price of
the raw materials.
Due to this the people of the country has to pay more for
the same commodity than what they were paying. Due to this
they have to decrease the consumption of the other services
like hotels, airlines etc. Which causes service industries
to suffer from the losses because of the low demand of
their services.
Companies layoff the workers from their jobs because of the
less demand of their services and even manufacturing
companies produces less products because of their less
consumption and the result of this lead to recession.
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