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Q) What do you mean by inflation ? A sustained, rapid increase in prices, as measured by some broad index (such as Consumer Price Index) over months or years, and mirrored in the correspondingly decreasing purchasing power of the currency. It has its worst effect on the fixed-wage earners, and is a disincentive to save. There is no one single, universally accepted cause of inflation, and the modern economic theory describes three types of inflation: (1) Cost-push inflation is due to wage increases that cause businesses to raise prices to cover higher labor costs, which leads to demand for still higher wages. (2) Demand-pull inflation results from increasing consumer demand financed by easier availability of credit

(3) Monetary inflation caused by the expansion in money supply (due to printing of more money by a government to cover its deficits).