Inflation is considered a global phenomenon. It
takes place because of rapidly rising prices of goods and services, resulting
in the decline of the value of money.
Definitions
of Inflation:
According to Prof. Crowther, Inflation is a state in
which the value of money is falling and prices are rising.
According to Prof. Kemmerer, Inflation means too
much currency in comparison to the physical volume of business done.
Keynes stated that the rise in the price level after
the point of full employment is true Inflation.
Causes
of Inflation:
The main cause of inflation is the increase in the
demand of goods and services and at the same time decrease in the supply of
goods and
Factors
causing increase in demand for goods and services:
Certain factors like increase in public as well as
in private expenditure, increase in consumer spending, reduction in taxation,
repayment of old internal debts, growth in population, increase in exports and
deficit financing cause increase in demand for goods and services.
Factors
causing a decrease in supply of goods and services:
Factors like industrial disputes, shortage of
factors of production, natural calamities and hoarding of goods cause decrease
in supply of goods and services.
