Causes of Inflation

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  • Causes of Inflation and Government Policy
    • Inflation level= The Rate of Change of prices
    • Inflation = An increase in GENERAL price level
    • Deflation = A decrease in GENERAL price level (below base)
    • Disinflation = Inflation at a slower rate
    • Demand - Pull Inflation
      • More money in the economy so people spend more so demand increases
        • Monetary Inflation
      • Near full employment
        • Businesses compete for resources
        • People have disposable income
      • TIGHT fiscal and monetary policy
    • Cost - Push inflation
      • Costs rise due to :
        • Food costs
        • Raw materials
        • Wage costs
        • Land costs
        • Exchange rate costs
      • Governement cannot do much to help

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