ABSTRACT
The fact that price movements are measured in terms of percentage changes per month or per year underlines a most important characteristic of inflation–it is a process that unfolds itself over time. Under inflation aggregate demand can increase in money terms as fast as or even faster than the money value of output, and so the analogy with the "real" Multiplier breaks down. The expectation of future reductions in purchasing power will create an incentive to economize on the holding of money balances. "Cost-push" theory of inflation, the causal sequence is reversed: the initial impulse is given by an autonomous rise in money wages or other input prices, in response to which the prices of "final" goods and services are raised to cover the increase in costs. Inflationary process that seems to be one of cost inflation may in reality be due to the pressure of excess demand or, at any rate, may combine both demand-pull and cost-push elements.
