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Three primary causes of inflation are demand-pull inflation, cost-push inflation, and built-in inflation. Demand-pull inflation occurs when overall demand for goods and services exceeds supply, leading to higher prices. Cost-push inflation arises when the costs of production, such as wages and materials, increase, prompting producers to raise prices to maintain profit margins. Built-in inflation is linked to adaptive expectations, where businesses and workers expect prices to rise and adjust wages and prices accordingly, creating a self-perpetuating cycle of inflation.

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