inflation

inflation is a rise in the general level of prices of goods and services in an economy over a period
of time. There are two types of inflation

Demand pull inflation:
when aggregate demand in an economy out paces aggregate supply.
some causes of demand pull inflation
l Reduce interest rate
l Decrease taxation(increase employment)
l Government spending increase(lower unemployment)

Cost push inflation
caused by substantial increases in the cost of
important goods or services where no suitable
alternative is available
Short run: wage of labour, for example, with
trade union power increase, the wage may goes
up, because of the wage,
the company need spend more money on labour,
thereforethe cost will increase as well. If the company
want to get profit, they need increase the price, and
price level goes up too.This is a example for cost push
inflation.
Longrun :
Unemployment
Demand pull inflation:
when aggrgate demand in an economy out paces
aggregate supply.
some causes of demand pull inflation
l Reduce interest rate
l Decrease taxation(increase employment)
l Government spending increase(lower unemployment)