There are various reasons why inflation may occur. One factor would be an increase in the demand for products. If people have more money or more access to money, they will generally spend it. Federal Reserve Board policies may impact the money supply. If the Federal Reserve Board lowers interest rates, it makes it easier for people and businesses to borrow money. If businesses borrow money to expand their operations, this should create more jobs, increasing employment and giving people more money to spend. Likewise, if interests rates drop, people may take out loans in order to buy products. In these situations, the demand for products should rise, and if supply doesn’t increase, prices will also rise.
The government may also be responsible for inflation. If government spending increases, this will also increase the demand for products and services. With more money in the economy and with an increased demand for products, inflation would occur.
Another factor that might lead to inflation would be an increased cost of doing business. If businesses have to pay more for their supplies and for their labor costs, they will likely pass these additional costs on to consumers. When the price of gasoline rose to over $4.00 per gallon in the United States, many businesses passed their increased transportation costs on to consumers, resulting in higher prices.
https://fee.org/articles/the-causes-of-inflation/?gclid=CjwKCAjwwPfVBRBiEiwAdkM0HTyNu3PWvW0rpYuwAjWgwhozYuV1P923cL_2eP6mRssrI9QVBMuMghoCWJEQAvD_BwE
https://www.frbsf.org/education/publications/doctor-econ/2002/october/inflation-factors-rise/
"Inflation" is a term which refers to an overall increase in the prices of things across all markets. There are two main reasons inflation happens:
1. Demand for goods and services grows too quickly for the economy to keep up. If there is a sudden increase in demand for a particular item, and the economy is unable to produce more of the item so that supply meets demand, the price of the item will rise. If demand grows across multiple sectors, causing multiple price rises, this drives inflation. This type of inflation can also be driven by an increased supply of money to the economy from the banks, making the money itself worth less.
2. The actual cost of production increases, because the raw material used to produce goods gets higher, or the minimum wage is lifted so that the cost of employing people is higher. This can lead to an increase in the overall prices of goods that make it to the consumer.
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