Define inflation. Explain any four factors that cause demand-pull inflation.
Inflation is basically a rise in prices.
A more exact definition of inflation is a situation of a
sustained increase in the general price level in an economy. Inflation means an
increase in the cost of living as the price of goods and services rise.
The main causes of demand-pull
inflation are:
1. Growth in Black Money—Growth in unaccounted money
leads to more demand for goods.
2. Increase in Population—Increase in population raises
the number of consumers in the market.
This, in turn, raises demand for goods.
3. Increase in Money Supply—Increase in money supply by
the RBI raises the money in circulation, which in turn raises demand for goods.
4. Increase in Disposable Income of the Consumer—When the
common man has more money at his disposal, he will demand more goods.
Inflation is basically a rise in prices.
A more exact definition of inflation is a situation of a sustained increase in the general price level in an economy. Inflation means an increase in the cost of living as the price of goods and services rise.
The main causes of demand-pull inflation are:
1. Growth in Black Money—Growth in unaccounted money leads to more demand for goods.
2. Increase in Population—Increase in population raises
the number of consumers in the market.
This, in turn, raises demand for goods.
3. Increase in Money Supply—Increase in money supply by the RBI raises the money in circulation, which in turn raises demand for goods.
4. Increase in Disposable Income of the Consumer—When the common man has more money at his disposal, he will demand more goods.
