- NEW!
by Yoyo Head on March 1st, 2004
The primary cause of inflation is the growth of the money supply. That means the federal government creating money. If that happens faster than the expansion of the economy, the result is too many dollars chasing too few goods and services. Thus each dollar's purchasing power is less than before.
There are other causes of price increases, like the way the price of oil going up and down causes fluctuations in the price of gasoline. But effects like these are smaller and temporary, and they cause both upward and downward pressure on prices. The only big and permanent cause of inflation is money growth. When the USA had a gold standard, there were price fluctuations, but the average rate of inflation over a a long time period was zero.
The Federal Reserve System is an attempt to improve on the gold standard by putting the federal government in charge of the money supply through a central bank.
What was the price of gas when oil was $60 a barrel?
by Answerbag Staff on April 23rd, 2011
| 1 person likes this
What is the cyclical rate of unemployment ?
by Answerbag Staff on April 22nd, 2011
| 1 person likes this
The marginal revenue of the 70th unit produced equals?
by icurry601 on November 11th, 2010
| 1 person likes this
Where are emeralds mined in colombia?
by Answerbag Staff on April 22nd, 2011
| 1 person likes this
What will happen if economies grow and prices rise but unemployment rates remain high?
by Titan on October 26th, 2010
| 2 people like this
You're reading What are usually the main causes of inflation?
Your favorite Q&A site is on Facebook! Become a fan to connect with the ever-growing community of Answerbaggers, share your thoughts and find out what Answerbag's up to next!
Comments
Under the gold standard, there is usually deflation as the amount of gold is roughly fixed, but the economy expands.
by James Beatty on April 29th, 2004
James' comment is the only correct answer here. Wish I could rate it!
by Rumpleforeskin on June 1st, 2005