ABSTRACT
Inflation is a phenomenon that is usually hard to explain in quantitative terms. Economic theory has not yet managed to find an unambiguous explanation of the relationship between inflation and other major economic indicators. For Keynesians the root cause of inflation is budget deficits and their financing. The well-known Phillips curve argues for functional dependence between inflation and unemployment. For monetarists, the growth of money supply accounts for inflation, whereas for the disciples of the school of rational expectations, people’s expectations are to be blamed for the price rise.
