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Understanding Inflation: Causes, Effects, and Economic Implications -…
Understanding Inflation: Causes, Effects, and Economic Implications
Causes of Inflation
Supply Shocks
Events like Russia's invasion of Ukraine caused significant disruptions in global energy supplies, leading to sharp price increases.
Supply shocks can create immediate inflationary pressures as the availability of essential goods diminishes.
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Inflation Expectations
When consumers and businesses anticipate future price increases, they may demand higher wages, which can lead to a self-fulfilling cycle of inflation.
This expectation can prompt producers to raise prices, further fueling inflation.
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