Inflation

Inflation is inordinate sustained increase in the general price level. The increase in general price level can be cause by many factors the main factors are demand pull inflation, cost push inflation, profit push inflation and government intervention. Demand pull inflation can cause inflation because when the consumer income increase, the purchasing power will also increase then this will lead to an increase in demand and when the supply is inelastic then it need time to catch the demand which will lead to an increase in price. The next factor that affects inflation is cost push inflation. This is when the price of raw material or labor cost is increasing, then the production cost will also increase, which will further lead to an increase in the final product price. The profit push inflation is cause by the monopolist or. The decrease their production in order to create a shortage, then this will lead to a decrease in the supply which will cause inflation. Then the last factor is government intervention. Some of the example of government intervention that can cause inflation is when there are excessive government spending, increasing in the indirect taxes, increasing the direct taxes which will lead to an increase in the disposable income then will further lead to an increase in the demand and will cause inflation.