inflaation Flashcards
1
Q
what are the three main causes of inflation
A
- demand pull
- cost push
- growth of money supply
2
Q
what is cost push inflation
A
when the costs of production for goods and services increase
3
Q
what are the causes of cost push inflation
A
- increase in input costs
- higher wage demands
- government regulations
- supply disruptions
- fall in exchange rate
- higher taxes on production
4
Q
what is demand pull inflation
A
is a type of inflation that occurs when aggregate demand increases leading to higher prices for goods and services
5
Q
what are the causes of demand pull inflation
A
- increase in consumption (C)
- increase in private sector investment (I)
- increase in government spending (I)
- increase in value of (X-M)
6
Q
what is growth of the money supply
A
an increase in the money supply - more money is chasing the same amount of goods and firms would be able to increase prices - consumers will pay higher prices as they have extra money to buy them
7
Q
what is shoe leather cost
A
searching for cheaper alternatives due to prices increasing - shoes would be worn down
