What Are the Causes and Policies Used to Counteract Inflation

Inflation is a sustained increase in the general price level over time within an economy. It is regarded as an economic problem as it leads to a fall in the value of money or real purchasing power. Inflation is caused by demand and supply pressures, notably demand inflation, cost inflation, imported inflation and inflationary expectations. Coupled with the many negative effects that Inflation burdens on the Australian economy, the government sets about using a variety of macroeconomic and microeconomic policies to control the level of inflation within the economy. …