6.1.5.1. Causes of Inflation

6.1.5.1. Causes of inflation

Inflation may be caused by excess demand, by the rise in wage rates or monopoly profits or by some combination of the two. If the inflation is due to excess demand, it could be controlled with monetary measures. The excess – demand driven inflation is called demand-pull inflation. Growth of monopolies in goods or factor markets cause what is known as cost-push inflation which could not be effectively controlled by monetary and fiscal tools.

Last modified: Thursday, 22 December 2011, 11:16 AM