Increase in money supply:The rapid increase in money supply than output is the major factor which induces on increase in demand for goods. The increase in money supply raises the income of the people to be spent on the purchases of goods. It also enhances the bank on the basis of expansion of credit. The increase in money supply more than the rise in real money demanded induces inflationary situation in the country.
Rapid rise in investment spending:Another factor for the rapid increase in demand for goods and services in the sharp rise are in investment both in the public and private sectors. The rise in investment spending causes increase in the prices of resources, hence prices of goods move up ward.
Deficit financing:When the government spends more than what it expects to collect from revenue, it then issues more currency in the market or borrows funds from different loaning agencies. Deficit financing brings more money in the market and also responsible for rapid rise in the general price level.
Upsurge in military spending:The sharp increases in government military spending every year contributes every year contributes to the rise in total and so to the inflationary spiral.
Rapid rise in investment spending:Another factor for the rapid increase in demand for goods and services in the sharp rise are in investment both in the public and private sectors. The rise in investment spending causes increase in the prices of resources, hence prices of goods move up ward.
Deficit financing:When the government spends more than what it expects to collect from revenue, it then issues more currency in the market or borrows funds from different loaning agencies. Deficit financing brings more money in the market and also responsible for rapid rise in the general price level.
Upsurge in military spending:The sharp increases in government military spending every year contributes every year contributes to the rise in total and so to the inflationary spiral.
