Inflation and Its Major Causes Assignment Example | Topics and Well Written Essays - 250 words - 1

Inflation and Its Major Causes - Assignment Example This paper illustrates that the effects of inflation are faced by everyone in the economy. The producers of the goods and services increase their productivities to earning the more profits in the situation of higher prices. The situation also creates an inequality in the society, as the poor become poorer and rich become richer.   It not only affects the economy internally but also disturbs the balance of trades and the exchange rates of money. The situation of demand-pull inflation arises in the results of the increase in the aggregate demand, but the supply remains same in the markets. So the prices rise, and the situation of inflation occurs. If the costs of the production rise in the market, then the prices of factors of productions also increase. Increase in costs of productions results in the rise of goods and services prices in the public markets. To solve the issue of inflation, the government has to introduce new strategies of fiscal as well as monetary policies. Through t hese policies, the profits of savings are increased in the banks, and then the people save more for profits. A rate of interests is also fixed at the low ratio, so the investors start new businesses to maintain the level of demand and supply in the market.