THREE MAIN CAUSES OF INFLATION

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THREE MAIN CAUSES OF INFLATION

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About

• Demand pull inflation
• When there is an increase in aggregate monetary
  demands it results in demand pull inflation. This
  can be caused by an increase in one or more of
  the components of aggregate demand (AD) and where
  aggregate supply (AS) is slow to adjust.
• The causes are demand shocks, like
• Earning rising above productivity.
• Reduction in interest rates and cheaper credits.
• Excessive rate of public sector borrowing.
• Creating equity withdrawal and a positive wealth
  effect.
• Changes in savings ratio.

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