Inflation causes

Inflation causesMoney supply theoryInflationary Wave TheoryKeynesian inflation theoryDemographics inflation theory

NEW: Inflationary Wave Theory

How inflation is caused by an underlying trend of competition for resources. Price increases depict a wave-like pattern over the centuries due to man exploiting inflation to such a point that prices eventually consolidate.

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Money Supply Theory

The theory first proposed by Copernicus that prices rises are proportional to the amount of money in the economy. Later developed into the "quantity theory of money" i.e. MV=PQ. Has its effect on inflation over the medium-term.

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Keynesian Theory

Keynes proposed that inflation was primarily caused either by demand outstripping supply and pulling inflation higher or by higher costs pushing inflation higher. Explains short-term prices changes well.

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Population Theory

Malthus proposed that the long-term increase in prices is a result of the ever increasing world population and competition for resources that this creates.

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Different theories. Different time frames

Different theories affect inflation over different time frames: long-term by population, medium-term by the money supply and short-term by Keynesian factors.

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Governments and inflation

Since World War II, governments around the globe have been fostering inflation as both a form of taxation and a way of dealing with their fiscal imbalances.

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