Budget deficits:
As a result of growing public expenditure programmes, most governments
unguardedly incur budget deficits, which contribute largely to inflation.
As a result of growing public expenditure programmes, most governments
unguardedly incur budget deficits, which contribute largely to inflation.
Imported inflation:
Inflation may also be imported from countries experiencing general rise in
prices through importation of highly priced goods. This becomes critical for
many developing countries that depend majorly on the industrialized (developed)
countries for their manufactured goods, industrial raw materials and
machineries.
Inflation may also be imported from countries experiencing general rise in
prices through importation of highly priced goods. This becomes critical for
many developing countries that depend majorly on the industrialized (developed)
countries for their manufactured goods, industrial raw materials and
machineries.
High Population Growth:
A high population growth rate will lead to large population and expansion in
aggregate demand. If the growth rate of a country’s output is below her
population growth rate, supply will fall short of demand and prices will tend
to rise.
A high population growth rate will lead to large population and expansion in
aggregate demand. If the growth rate of a country’s output is below her
population growth rate, supply will fall short of demand and prices will tend
to rise.
Rural-Urban Drift (Migration): The
movement of rural dweller to urban centers is a natural occurrence in the
growth process of a nation. Such movements, however, generate a lot of pressure
on goods and services in the cities and may lead to inflationary tendencies.
movement of rural dweller to urban centers is a natural occurrence in the
growth process of a nation. Such movements, however, generate a lot of pressure
on goods and services in the cities and may lead to inflationary tendencies.
Monopolistic Activities of
Middlemen: Middlemen play a key role in the
distribution/marketing of goods and services. Where there are no devices to
check the exploitative inclinations of these agents (as in most underdeveloped
countries), their desire for abnormal profits may motivate them to engage in
practices (such as hoarding) which create artificial scarcities and push up
prices. A case in point is the marketing of petroleum in Nigeria, which, until
recently, has witnessed a lot of sharp practices.
Middlemen: Middlemen play a key role in the
distribution/marketing of goods and services. Where there are no devices to
check the exploitative inclinations of these agents (as in most underdeveloped
countries), their desire for abnormal profits may motivate them to engage in
practices (such as hoarding) which create artificial scarcities and push up
prices. A case in point is the marketing of petroleum in Nigeria, which, until
recently, has witnessed a lot of sharp practices.
Natural Disasters:
Natural disasters such as famine, wars etc. affects the supply of goods and
services and tend to push up prices. Wars, for example, generally divert
resources from production of consumer goods to war equipment, thereby pushing
up the prices of the former.
Natural disasters such as famine, wars etc. affects the supply of goods and
services and tend to push up prices. Wars, for example, generally divert
resources from production of consumer goods to war equipment, thereby pushing
up the prices of the former.