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what factors will increase inflation in the short-run ?

what factors will increase inflation in the short-run ?

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Answer #1

There are various factors that will increase inflation in the short run. It can increase either due to an increase in Aggregate Demand (AD) or due to a decrease in Aggregate Supply (AS). The factors that increase AD are expansionary fiscal policy including increase in government expenditure, and reduction of taxes. It can also increase due to increase of spending in the economy. Or, AD can increase due to expansionary monetary policy which means increasing the money supply.
Supply side factors include increase in cost of production due to increase in price of inputs which will reduce short run aggregate supply. So, all these factors will increase inflation in the short run.

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