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What is Inflation?
Inflation is the continuous rise in price level. A price rise is a necessary condition for inflation it is not a sufficient condition. That is, the price level has to be rising each period that you observe it. There are two types of inflation – they are cost push and demand pull. There are two types of cost push inflation – cost push/acts of God and cost push/market power.
Demand pull inflation is when demand for a product or input outpaces the supply of the product. Cost push/acts of God is where a natural disaster wipes out an input, say a crop of bananas. Cost push/market power is where the price of a common input is artificially inflated by the monopoly or oligopoly suppliers, say the oil crisis of the 70s.
Further Reading
Inflation: What Really Causes It
Modern Money and Inflation
Money Growth does not cause Inflation
What Causes Inflation?
Inflation is the continuous rise in price level. A price rise is a necessary condition for inflation it is not a sufficient condition. That is, the price level has to be rising each period that you observe it. There are two types of inflation – they are cost push and demand pull. There are two types of cost push inflation – cost push/acts of God and cost push/market power.
Demand pull inflation is when demand for a product or input outpaces the supply of the product. Cost push/acts of God is where a natural disaster wipes out an input, say a crop of bananas. Cost push/market power is where the price of a common input is artificially inflated by the monopoly or oligopoly suppliers, say the oil crisis of the 70s.
Further Reading
Inflation: What Really Causes It
Modern Money and Inflation
Money Growth does not cause Inflation
What Causes Inflation?
