Created by jackexamtime
almost 11 years ago
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Copied by eleanor.adamandi
almost 11 years ago
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The government can introduce policies which cause inflationSome of these policies include:> Increase in indirect taxes - this can lead to a "wage-price spiral"> Increase in expenditure in the economy - increasing social welfare introduces more money into economy, encourages greater spending and demand> Government relaxes banking regulations to allow banks to lend out more money to personal borrowers to stimulate demand in the economy
Causes of Inflation
There are three main causes of inflation; Demand-Pull Inflation, Cost-Push Inflation and Government-Induced Inflation
Demand Pull Inflation
This occurs when the economy can't produce enough goods/services to meet the demands of citizens.It's an event of too much money chasing too few goods.Because of the excess demand, there is price competition which drives prices up
Cost-Push Inflation
This occurs when the selling price of goods/services are increasing to compensate the producer for an increase in the costs of productionIncreases in costs of production arise as a result of an increase in the price of labour, or an increase in the price of raw materials
Government-Induced Inflation
Causes of Inflation
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