• Inflation as the continuous increase of the general price level in the economy.
• Inflation can be analyzed using the following approaches:
  • Demands pull inflation
  • Costs push inflation
  • Structural inflation

Demand pull Inflation 

• Demand pull inflation occurs due to too much money chasing few goods.
• Financial expansion, Increase in government debts and increase in government expenditure cause increase in demand.
• Theory of demand inflation has two approaches called the quantity theory of money analysis and Keynesian analysis.

Costs push Inflation

• Cost push inflation occurs due to the increase of the prices of goods and services followed by the increase of cost of production with higher prices of inputs.

Structural Inflation 

• Structural inflation occurs due to rigidity, limitations and inelasticities in the economic structure.