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 (the wage-price spiral), (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).
Most of us don't stop to think about it, but the value of a dollar is always changing. It swings up and down with the financial fortunes of the United States. Sometimes a dollar is worth more than others, and sometimes it seems like a dollar is worth nearly nothing. The differences in the value of a dollar from one point to another are caused by inflation and deflation.Inflation
When a dollar buys less than you would expect it to, we call that inflation. Inflation is caused by a variety of factors, but most of them are related to interest and debt. When the Federal Reserve bank raises interest rates, it causes the dollar to inflate. There is more money in the system, so every dollar is worth just a little bit less.Deflation