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So-called demand-pull inflation may be caused by increases in aggregate demand due to increased private and government spending, [83] [84] etc. Conversely, negative demand shocks may be caused by contractionary economic policy. Supply shocks may also lead to both higher or lower inflation, depending on the character of the shock.
What caused inflation in 2022? A major cause of inflation in 2022 was the supply chain issues caused by the COVID-19 pandemic -- as goods became scarce, prices went up in response to continued demand.
Even more so than hyperinflation, chronic inflation is a 20th-century phenomenon, being first observed by Felipe Pazos in 1972. [2] High inflation can only be sustained with unbacked paper currencies over long periods, and before World War II unbacked paper currencies were rare except in countries affected by war – which often produced extremely high inflation but never for more than a few ...
This coincided with strong consumer demand, driven by low unemployment and improved financial conditions following the pandemic. [24] The higher demand caused by the U.S. government's $5 trillion aid spending exacerbated supply-side issues in the United States; according to the Federal Reserve Bank of San Francisco researchers, this contributed ...
For example, a government will often raise interest rates in a high-inflation economy, discouraging borrowing and encouraging saving. Over time, prices for goods and services drop, enticing ...
Stagflation, in this view, is caused by cost-push inflation. Cost-push inflation occurs when some force or condition increases the costs of production. This could be caused by government policies (such as taxes) or from purely external factors such as a shortage of natural resources or an act of war.
The national consumer price index rose 6.2 percent from October 2020 to October 2021. That's the largest 12-month increase since 1990, according to the Bureau of Labor Statistics.
While there can be a number of causes of high inflation, almost all hyperinflations have been caused by government budget deficits financed by currency creation. Peter Bernholz analysed 29 hyperinflations (following Cagan's definition) and concludes that at least 25 of them have been caused in this way. [9]