Explain two causes of inflation using AD/AS analysis.

Two causes of inflation include an increase in the price of oil and a depreciation of the pound. An increase in the price of oil will cause the costs of production for producers to rise, such as when fuel for airline companies is more expensive. Producers will then in turn increase the prices of their product to protect their profit margin, causing a rise in prices represented by an outward shift in the long run aggregate supply curve, causing inflation.
A depreciation of the pound means that imports will be more expensive relative to domestic goods, as each pound can buy less foreign currency and thus foreign goods after its depreciation. As a result, domestic consumption, a component of aggregate demand, will increase, shifting the curve outwards. If the AD curve is already at the inelastic part of the LRAS curve, inflation will result as firms will see higher costs competing for scarce resources of production, and thus increase their prices to reflect this.