What are the causes of inflation?
Inflation is the greater spread of money in a country than the available goods and services. This ruins the economy of that country. The purchasing power of money decreases. Do you know what are the causes of inflation?
There are many reasons for inflation. When the production of a country decreases and the demand for things remains the same, then the prices of goods start rising. Due to the fear of rising inflation, people start buying more things than they need. By doing this, the shortage of goods becomes even more, due to which the prices start rising rapidly. In such a situation, if people reduce the purchase of things, then rising inflation can be stopped. But it is a very difficult task to encourage people not to buy things.
When the prices of commodities start rising, the merchant class starts hoarding things to earn more profit, which leads to a temporary shortage of goods in the market. As a result, prices rise even more rapidly. Sometimes, the workers working in factories also go on strike, causing an inflationary situation, because as a result of the strike the production becomes very less. Too much circulation of money also creates a situation of inflation.
People who earn more money from this situation, they spend that money unnecessarily, which increases inflation even more. The biggest impact of rising inflation is more on the employed people with limited income. It also has a very bad effect on the working class. Rising prices create an outcry in the country. The government finds out its reasons for controlling inflation. If the government imposes wrong controls to contain inflation, the situation becomes even worse.
