Project report on inflation

Causes of Inflation:-

• 
  · Developing Economy
  

Unemployment falls and salaries normally rise in a developing or expanding economy. As a result, more people have more money in their pockets, which they are ready to spend on both luxuries and necessities. This increased demand allows suppliers to raise prices, which leads to more jobs, which leads to more money in circulation, and so on.
· Increase in the Money Supply
Demand-pull inflation can also be fuelled by a larger money supply. This occurs when the Fed issues money at a faster rate than the economy's growth rate. Demand rises as more money circulates, and prices rise in response. Another way to look at it is as follows: Consider a web-based auction. The bigger the number of bids (or the amount of money invested in an object), the higher the price. Remember that money is worth whatever we consider important enough to swap it for.

• 
  · Government rules and regulations
  

The government has the power to enact new regulations or tariffs that make it more expensive for businesses to manufacture or import goods. They pass on the additional costs to customers in the form of higher prices. Cost-push inflation arises as a result of this.

• 
  · Taking care of the national debt
  

When the national debt becomes unmanageable, the government has two options. One option is to increase taxes in order to make debt payments. If corporation taxes are raised, companies will most likely pass the cost on to consumers in the form of increased pricing. This is a different type of cost-push inflation situation. The government's second alternative is to print more money, of course. As previously stated, this can lead to demand-pull inflation. As a result, if the government applies both techniques to address the national debt, demand-pull and cost-push inflation may be affected.

• 
  · Increase of Exchange rate
  

When the US dollar's value falls in relation to other currencies, it loses purchasing power. In other words, imported goods – which account for the vast bulk of consumer goods purchased in the United States – become more expensive to purchase. Their price rises. The resulting inflation is known as cost-push inflation.