What is anatomy of inflation?

Answer 1

The anatomy of inflation refers to the underlying factors and mechanisms that contribute to rising prices in an economy. It typically involves demand-pull inflation, where increased consumer demand outpaces supply; cost-push inflation, where rising production costs lead to higher prices; and built-in inflation, which is driven by adaptive expectations and wage-price spirals. Central banks and governments monitor these factors closely to implement monetary and fiscal policies aimed at stabilizing prices and promoting economic growth. Understanding this anatomy helps policymakers address the root causes of inflation effectively.