Loading

Module 1: Types of inflation

Notes
Study Reminders
Support
Text Version

Causes of Inflation

Set your study reminders

We will email you at these times to remind you to study.
  • Monday

    -

    7am

    +

    Tuesday

    -

    7am

    +

    Wednesday

    -

    7am

    +

    Thursday

    -

    7am

    +

    Friday

    -

    7am

    +

    Saturday

    -

    7am

    +

    Sunday

    -

    7am

    +

XSIQ
*

Economics - Causes of inflation

Causes of inflation

The main causes of inflation are:

* _Increased levels of aggregate demand._ Periods of strong growth in
expenditure have contributed to inflation, as the economy has not been able
to meet the higher demand for goods and services.

* _Higher input prices._ Increased prices of raw materials, semi-finished
goods and capital goods have contributed to inflation.

* _Inflationary expectations._ If inflation is expected to rise, groups
in the economy, such as trade unions and businesses, move to protect
themselves against the loss of purchasing power. This adds to inflationary
pressures.

* _Imported factors._ If the price of overseas goods increases, due to
factors such as overseas inflation or a depreciation of the Australian
dollar, consumers are faced with higher prices and firms are faced with
higher input prices. This contributes to inflation.

Previous | Next