What causes an increase in price levels?

Increase in price level is also referred to as inflation. Such an increase in the economy is usually due to macroeconomic factors such as demand, supply and consumption. All other macroeconomic factors that affect the increase in price levels are somehow related to these three factors. Other areas include interest rate, monetary policy and gross domestic product (GDP).

Inquiry and supply cause price levels due to the fact that the level of demand in the economy plays a role in determining the level of market activity. It is desirable a consistent and active market on which the supply level is approximately the same as the level of demand, as the price of goods and services remains stable and excludes any other external factor. If demand is more than supply, the natural consequence is to increase the price of goods and services. Such an increase may be caused by a number of factors that include the accumulation of goods in anticipation of Fear or the lack and the fact that rare resources become rareA sequence of unavailability.

Another factor that causes an increase in price levels is the intentional action of manufacturers, manufacturers and retailers from goods and services that can artificially increase the price of products to maximize profits or replace the imbalance in the inflow of cash. This type of action contributes to the inflation impact on the economy by causing the prices of goods and services to increase to a level that is higher than usual. Sometimes companies can reduce the price of goods after a while, otherwise the new price regime may remain.

Too much or excess liquid cash on the market is a factor that results in price levels. This is especially true if cash in the economy is easier to access than goods or services. This type of situation can occur in some economies where the government is dealing with indiscriminate printing of money in response to financial shortcomings. Money soon loses its value and results inIitation where a suitcase full of money buys a handful of goods only if the opposite is true.

Employee activities indirectly are related to the increase in price levels, as during inflationary staff found that their salaries did not go before. This can get employees and various trade unions to get upset for raising salaries so that money can catch up with the price of goods and services. In some economies, this causes another shift in the price of goods and services, as traders further increase the prices of goods in response to salary increase.