Asked by: Aleu Neamtuasked in category: General Last Updated: 6th January, 2020
What are the 3 theories of inflation?
Correspondingly, what are the three types of inflation?
There are three main types of inflation: demand-pull, cost-push, and built-in inflation. Demand-pull inflation occurs when the overall demand for goods or services increases faster than the production capacity of the economy.
Also, what is demand pull theory of inflation? Demand-pull inflation is asserted to arise when aggregate demand in an economy outpaces aggregate supply. It involves inflation rising as real gross domestic product rises and unemployment falls, as the economy moves along the Phillips curve.
Secondly, what is theory of inflation?
The market power theory of inflation represents one extreme end of inflation. According to this theory inflation exists even when there is no excess in demand. On the other end, the conventional demand-pull theorists believed that the only cause of inflation is the excess of aggregate demand over aggregate supply.
What is monetarist theory of inflation?
Monetarists argue that if the Money Supply rises faster than the rate of growth of national income, then there will be inflation. “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.