CAUSES OF INFLATION
Increase in money supply: Increase in money supply leads to an increase in money income. The increase in money income raises the monetary demand for goods and services.
Increase in public expenditure: an expansion of government expenditure as a result of development and welfare activities causes an increase in the aggregate demand for goods and services in the economy.
Cheap monetary policy: cheap monetary policy of credit leads to an increase in money supply which indirectly raises the demand for access goods and services in the economy.
Increase in population: A rapid growth of population raises the level of aggregate demand in the economy because of increase in consumption, investment, government expenditure, and net foreign expenditure.
Shortage of factor of production: Shortage of factor of production such as labor, raw material capital power supply leads to a reduction in industrial production.
0 Comments