The other side of the coin - Monetary Inflation

In the past, we have discussed Price Inflation. That is what people generally perceive inflation as - the increase in price of goods. This is one side of the story, the effect of "something" as its cause.

The other side of the coin, that "something", is "Monetary Inflation". This refers to the increase in money supply, which we have already discussed as the purchasing power in our older post. With more money, the purchasing power of an individual increases, thereby increasing the demand for goods, and the inflation rate.

One cannot say that monetary inflation is the only cause for price inflation; it is one of the many important factors. The causes include factors from the social, economic and political systems and hence the analysis becomes complex.