Explain the two main causes of inflation

Demand-pull - This type of inflation is caused by a rise in aggregate demand in the economy. The components of aggregate demand are consumption, investment, government spending and net exports. A rise in any of these components would cause aggregate demand to rise and hence inflationCost-push - This type of inflation focuses on the supply side of the economy. This could be caused by a rise in the minimum wage, causing the costs to firms to rise and then for it to be passed on to consumers and cause inflation. This could also be caused by a supply shock which raises the price of raw materials

AS
Answered by Adam S. Economics tutor

2101 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

Define the term ‘subsidies’ .


What are the economic assumptions for a perfectly competitive market?


How does a reduction in the interest rate affect aggregate demand in a closed economy?


What is a public good?


We're here to help

contact us iconContact usWhatsapp logoMessage us on Whatsapptelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2025

Terms & Conditions|Privacy Policy
Cookie Preferences