Causes of inflation

Inflation is primarily caused by an imbalance in the supply and demand of goods and services in an economy. One of the main causes of inflation is excessive demand, which occurs when there is an increase in consumer spending, investment, or government spending without a corresponding increase in the supply of goods and services. This can happen due to factors such as low interest rates, high levels of consumer confidence, or expansionary monetary and fiscal policies. Another significant cause of inflation is cost-push inflation, which is driven by increases in production costs, such as wages, raw materials, or taxes, being passed on to consumers through higher prices. Additionally, inflation may also be triggered by changes in exchange rates, supply shocks, or expectations of future inflation.

This mind map was published on 17 September 2023 and has been viewed 57 times.