Unit Two: Inflation

Inflation

• Reduces the purchasing power of money 
• When inflation occurs, each dollar of income will buy fewer goods than before

Demand-Pull Inflation 

• Too many dollars chasing too few goods
• Demand pulls of prices

Cost-Push Inflation

• Higher production cost, increases prices

Causes of Inflation:

1. Government prints too much money:
• Governments that keep printing money to pay debts end up with a condition called hyper-inflation
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