Causes of Inflation: Cost-Push & Demand-Pull
There are three main causes of inflation. They are cost-push, demand-pull, and the velocity by which money circulates in the economy.
Inflation
Inflation is where prices in the economy as a whole start to increase. This is typically measured using the Consumer Price Index (CPI), which takes a basket of commonly purchased goods and tracks its price movements.
Effects of Inflation: Positive & Negative Effects
Some of the common effects of inflation include; loss in purchasing power, higher asset prices, rising inequality, and impacts on cost of borrowing.
How is Inflation Measured
So now we have looked at what money essentially represents, let us look at how inflation is measured. Inflation is usually measured through the CPI, which is based upon a basket of goods.
What is Inflation
Inflation is created through excessive money creation. That is to say, money supply is in excess of economic output. Let’s say GDP grows at 2 percent. If the money supply increases by 3 percent, we could expect inflation.
