What would be likely to increase inflation in any economy?
Answer Details
Inflation is the general increase in the price level of goods and services in an economy over time. Several factors can cause inflation, but one likely cause is an increase in demand for goods and services.
When there is an increase in demand for goods and services, it can lead to a rise in their prices. If the supply of goods and services does not increase at the same rate as the demand, this can create a shortage, which allows sellers to increase their prices.
Reducing public spending and increasing direct tax can both have a deflationary effect, which means they can reduce inflation. However, controlling excessive import may not necessarily lead to a decrease in inflation, especially if there is still high demand for goods and services within the domestic economy.
Overall, an increase in demand is a likely factor to cause inflation in an economy, while reducing public spending and increasing direct tax can help to control it.