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
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