Causes of Inflation Video Lecture | Indian Economy for UPSC CSE

Ans. Inflation can be caused by several factors, including: - Demand-pull inflation: When the demand for goods and services exceeds the supply, prices tend to rise. - Cost-push inflation: When the cost of production increases, such as higher wages or raw material prices, businesses pass on these costs to consumers through higher prices. - Monetary inflation: When there is an increase in the money supply in an economy, it can lead to higher prices as consumers have more money to spend. - Built-in inflation: When workers and businesses expect prices to rise, they negotiate higher wages and prices, leading to a self-perpetuating cycle of inflation. - External factors: Inflation can also be influenced by external factors like exchange rate changes, trade imbalances, or geopolitical events.

Ans. Demand-pull inflation occurs when the demand for goods and services increases faster than the supply. This can happen due to factors like increased consumer spending, government stimulus programs, or a surge in investment. As demand outpaces supply, businesses may raise prices to take advantage of the increased demand, leading to inflation.

Ans. Cost-push inflation occurs when the cost of production increases, causing businesses to raise prices. This can be due to various factors such as higher wages, increased raw material prices, or additional taxes or regulations imposed on businesses. When businesses face higher costs, they pass on these expenses to consumers through higher prices, resulting in cost-push inflation.

Ans. Monetary inflation refers to an increase in the money supply in an economy. When there is more money available, consumers have more purchasing power, leading to increased demand for goods and services. This increased demand can push prices higher as businesses try to meet the rising demand, resulting in monetary inflation.

Ans. Yes, external factors can significantly impact inflation. For example, exchange rate changes can affect the prices of imported goods, leading to inflation if the local currency weakens. Trade imbalances, such as a country importing more than it exports, can also contribute to inflation. Additionally, geopolitical events like wars or disruptions in the global supply chain can impact the availability and cost of goods, potentially causing inflation.