CAUSES OF INFLATION, Increase in demand: When the demand for goods and services is greater than supply, this results in inflation (demand- pull inflation). Low production: Low production of goods and services can lead to their scarcity and when supply cannot meet up with high demand, inflation sets in.
MAJOR CAUSES OF INFLATION
- War: War is a major cause of inflation as people no longer produce, resulting in high volume of money pursuing fewer goods.
- Increase in salaries and wages: When salaries and wages are increased, without corresponding increase in supply of goods and services, it can lead to excess money in circulation chasing fewer goods.
High cost of production: When there is high cost of production, manufacturers build in this high cost into the cost per unit and pass it to consumers, leading to cost-pull inflation.
Budget deficit: When government expenditure is more than its income, it results in budget deficit and this leads to inflation.
Population increase: A sudden rise in population will result in a corresponding rise in demand for goods and services and if there is no corresponding rise in supply, it will result in inflation. check out these recent posts
factors affecting the expansion of industries
mineral resources and the mining industries
Excessive bank lending: This can lead to excessive money in circulation chasing fewer goods and services.
Level of importation: High cost of importing raw materials can lead to high cost of goods, which is passed to chasing few goods and services.
Hoarding: Hoarding, which is the act of creating artificial scarcity of goods, can lead to inflation.
Inadequate storage facilities: When goods produced cannot be stored for future use, it can lead to scarcity, resulting in inflation.
Industrial strike: Prolonged strike can cause scarcity of goods and services, leading to inflation.
Money laundering: Mass transfer and injection of money into circulation can also cause inflation.
