What causes Inflation?

Inflation happens when prices go up and you just can't buy the same things with the same money as before. For example in 1950's your dollar was worth much more than it is today, meaning you could buy more things with it than you can today.

So what makes the price of goods go up? It all depends on supply and demand. When people want to buy things but there aren't enough of those things, the price goes up .There are two different types of inflation:

• Demand-Pull Inflation - This happens when the demand for goods goes up but the supply stays the same. If the seller cannot keep up with the demand then he can increase his prices as there is not enough to go around.

• Cost-Push Inflation - This happens when the supply of goods is low but the demand for them stays the same. When this happens the prices are pushed up.