What are causes for inflation ?
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Answer / sonali gawde
Demand-pull inflation refers to the idea that the economy
actual demands more goods and services than available.
This shortage of supply enables sellers to raise prices
until an equilibrium is put in place between supply and
demand.
The cost-push theory , also known as "supply shock
inflation", suggests that shortages or shocks to the
available supply of a certain good or product will cause a
ripple effect through the economy by raising prices through
the supply chain from the producer to the consumer. You
can readily see this in oil markets. When OPEC reduces oil
supply, prices are artificially driven up and result in
higher prices at the pump.
Money supply plays a large role in inflationary pressure as
well. Monetarist economists believe that if the Federal
Reserve does not control the money supply adequately, it
may actually grow at a rate faster than that of the
potential output in the economy, or real GDP. The belief
is that this will drive up prices and hence, inflation.
Low interest rates correspond with a high levels of money
supply and allow for more investment in big business and
new ideas which eventually leads to unsustainable levels of
inflation as cheap money is available. The credit crisis
of 2007 is a very good example of this at work.
Inflation can artificially be created through a circular
increase in wage earners demands and then the subsequent
increase in producer costs which will drive up the prices
of their goods and services. This will then translate back
into higher prices for the wage earners or consumers. As
demands go higher from each side, inflation will continue
to rise.
| Is This Answer Correct ? | 166 Yes | 34 No |
Answer / pritam_j
Fall in the value of the money, rise in prices and
over-issue of currecy.
| Is This Answer Correct ? | 182 Yes | 55 No |
Answer / shilpi agarwal
• Inflation may also result form an increase in the
costs of production. This leads to an escalation in the
price of the final finished products. This situation arises
when there is an increase in the prices of the raw
materials. Rise in the costs of labor may also contribute
to inflation. This is because the increase in the wages of
the labors will make the companies to increase the cost of
their products and extract the additional amount spent as
wages from the consumers.
• Inflation may occur if the government of a country
prints money in excess that what is actually required, to
deal with financial emergencies. This results in the
escalation of the prices with rapidity, to keep pace with
the currency surplus. This situation is known as the Demand-
Pull, which is characterized by forceful escalation of the
prices, owing to a higher demand.
• Inflation may also occur when federal taxes are
imposed on consumer goods like fuels or cigarettes. With
the rise in the taxes, it is the common trend of the
suppliers to forward the additional expenses to the
customers in the form of hike in the prices of different
products.
• The national debts and international lending may
also lead to inflation. The countries at the time of
borrowing money, need to pay interests. The payment of
interests makes the nations increase the overall prices of
commodities, to keep up with their debt repayment programs.
• A serious fall in the exchange rate may also be
cited as a cause of inflation. This is due to the fact that
the government has to deal with the differences in the
levels of the country's imports and exports
| Is This Answer Correct ? | 82 Yes | 15 No |
Answer / gaurav sharma
There are many causes for inflation, depending on a number
of factors. For example, inflation can happen when
governments print an excess of money to deal with a crisis.
As a result, prices end up rising at an extremely high
speed to keep up with the currency surplus. This is called
the demand-pull, in which prices are forced upwards because
of a high demand.
Another common cause of inflation is a rise in production
costs, which leads to an increase in the price of the final
product. For example, if raw materials increase in price,
this leads to the cost of production increasing, which in
turn leads to the company increasing prices to maintain
steady profits. Rising labor costs can also lead to
inflation. As workers demand wage increases, companies
usually chose to pass on those costs to their customers.
Inflation can also be caused by international lending and
national debts. As nations borrow money, they have to deal
with interests, which in the end cause prices to rise as a
way of keeping up with their debts. A deep drop of the
exchange rate can also result in inflation, as governments
will have to deal with differences in the import/export
level.
Finally, inflation can be caused by federal taxes put on
consumer products such as cigarettes or fuel. As the taxes
rise, suppliers often pass on the burden to the consumer;
the catch, however, is that once prices have increased,
they rarely go back, even if the taxes are later reduced.
Wars are often cause for inflation, as governments must
both recoup the money spent and repay the funds borrowed
from the central bank. War often affects everything from
international trading to labor costs to product demand, so
in the end it always produces a rise in prices.
| Is This Answer Correct ? | 57 Yes | 9 No |
Answer / sonali gawde
Demand-pull inflation refers to the idea that the economy
actual demands more goods and services than available.
This shortage of supply enables sellers to raise prices
until an equilibrium is put in place between supply and
demand.
The cost-push theory , also known as "supply shock
inflation", suggests that shortages or shocks to the
available supply of a certain good or product will cause a
ripple effect through the economy by raising prices through
the supply chain from the producer to the consumer. You
can readily see this in oil markets. When OPEC reduces oil
supply, prices are artificially driven up and result in
higher prices at the pump.
Money supply plays a large role in inflationary pressure as
well. Monetarist economists believe that if the Federal
Reserve does not control the money supply adequately, it
may actually grow at a rate faster than that of the
potential output in the economy, or real GDP. The belief
is that this will drive up prices and hence, inflation.
Low interest rates correspond with a high levels of money
supply and allow for more investment in big business and
new ideas which eventually leads to unsustainable levels of
inflation as cheap money is available. The credit crisis
of 2007 is a very good example of this at work.
Inflation can artificially be created through a circular
increase in wage earners demands and then the subsequent
increase in producer costs which will drive up the prices
of their goods and services. This will then translate back
into higher prices for the wage earners or consumers. As
demands go higher from each side, inflation will continue
to rise.
| Is This Answer Correct ? | 61 Yes | 23 No |
Answer / anie
Causes for Inflation
There are a few different reasons that can account for the
inflation in our goods and services; let's review a few of
them:
Demand-pull inflation refers to the idea that the economy
actual demands more goods and services than available. This
shortage of supply enables sellers to raise prices until an
equilibrium is put in place between supply and demand.
The cost-push theory , also known as "supply shock
inflation", suggests that shortages or shocks to the
available supply of a certain good or product will cause a
ripple effect through the economy by raising prices through
the supply chain from the producer to the consumer. You can
readily see this in oil markets. When OPEC reduces oil
supply, prices are artificially driven up and result in
higher prices at the pump.
Money supply plays a large role in inflationary pressure as
well. Monetarist economists believe that if the Federal
Reserve does not control the money supply adequately, it
may actually grow at a rate faster than that of the
potential output in the economy, or real GDP. The belief is
that this will drive up prices and hence, inflation. Low
interest rates correspond with a high levels of money
supply and allow for more investment in big business and
new ideas which eventually leads to unsustainable levels of
inflation as cheap money is available. The credit crisis of
2007 is a very good example of this at work.
Inflation can artificially be created through a circular
increase in wage earners demands and then the subsequent
increase in producer costs which will drive up the prices
of their goods and services. This will then translate back
into higher prices for the wage earners or consumers. As
demands go higher from each side, inflation will continue
to rise.
| Is This Answer Correct ? | 43 Yes | 15 No |
Answer / anand deshpande
Another reason for rise in inflation in a country like
India can be the dependence of our farmers on rain for the
production of crops. As a result, if the rain is inadequate
then the production of crops will be hampered and as a
result there will be increase in the prices of general and
essential commodities which will lead to rise in Inflation.
| Is This Answer Correct ? | 47 Yes | 30 No |
Answer / vivek saraswat (vikky)
the cause of inflation isfollowing
(1)increse in quantity of money
(2)expansion of currancy
(3)cretion credit
(4)banking policies
(5)commercial policies
(6)increse in investmant
(7)post war economy
(8)increase in ccost of production
| Is This Answer Correct ? | 17 Yes | 7 No |
Answer / budweiser
there are n number of reasons for inflation...
well we know today's sensex dip..
many know the up coming xyzz mobiles ..
few know the a,b,c technologies...
very few ..reading his know..the cost
of 1 kg dal ,or 1 kg wheat flour..arey least how much does
1 kg rice that u eat cost??
jus find out ... thats called
inflation
and jus be prepared 4 2mmrw..save ur
pocket ..(jus a suggestion)
| Is This Answer Correct ? | 34 Yes | 29 No |
Answer / shaun
1. increase in the price of commodities
2. value of currency decreases3.
3. when supply of goods decreases and demand increases.
4. quantity of money production above gdp.
5. full employment in the country.
6. increased investors in the market.
| Is This Answer Correct ? | 7 Yes | 4 No |
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