The causes of inflation are divided into two main categories:
1. Increase in Demand (Demand-Pull Inflation):
- Increase in Money Supply: More money with people leads to higher demand.
- Increase in Government Expenditure: Government spending on development and infrastructure increases circulation.
- Overpopulation: Rising population increases the demand for basic goods.
2. Increase in Cost (Cost-Push Inflation):
- Rise in prices of raw materials, labor wages, or fuel (like oil) increases production costs, which are passed to consumers.
3. Other Factors:
- Taxation policy (high indirect taxes), increase in prices of imports, and scarcity of resources.