What are the causes of Inflation?

1. Increased Consumer Spending: When consumers increase their spending significantly, it creates higher demand for goods and services. If production cannot keep up with this increased demand, prices tend to rise.
2. Rising Production Costs: If the cost of production for goods and services increases, businesses may pass these higher costs on to consumers in the form of higher prices. This can be due to factors such as increased wages, higher raw material costs, or increased energy prices.
3. Wage Price Spiral: This occurs when workers demand higher wages to keep up with the rising cost of living. When businesses accommodate these wage increases by raising prices, it can create a cycle where wages and prices continually rise.
4. Money Supply Growth: Inflation can be influenced by an increase in the money supply. If the supply of money grows faster than the supply of goods and services, it can lead to more money chasing fewer goods, resulting in higher prices.
5. Exchange Rates: Fluctuations in exchange rates can impact the prices of imported goods. A depreciation of the national currency may increase the cost of imported goods, contributing to inflation.

Inflation has a deep impact on the livelihood of the people living in any nation as the prices of all basic necessities increase with inflation. The prices of certain commodities increase with time but whenever there is a huge increase in the prices of basic commodities within a lesser period of time then it can be said that the nation is under inflation. However, there is not always a single reason for inflation there can be multiple reasons behind it. Also, it always doesn’t come with a loss for everyone sometimes it also results in profits for many people.