Causes of Inflation

inflation results when the macro economy has too much demand for available production.

These alternatives fall under two general categories:

1. Demand-Pull Inflation

This inflation occurs when household, business, government, and foreign industries collectively try to purchase more output than the economy is capable of producing.

In effect, the demand side of the aggregate market is "pulling" the price level higher.

2. Cost-Push Inflation

Cost-push inflation is inflation attributable to decreases in supply, primarily due to increases in production cost