[rock-onn]

The causes of inflation are cost-push, demand-pull and monetary expansion.

I read a few webpages on inflation. I understood the concept of cost-push, demand-pull. But I don't understand how does increase in money supply result in inflation.

[smoothy]

If you have one of something to sell and ten people want it... what happens? And why? Assume none of the 10 people are family or friends. Now assume the cost to make that one thing goes up for you to create it, what happens and why?

[rock-onn]

If ten people want the same thing, the highest bidder would get it and hence price increases.
If cost of making increases then price would increase to keep same profit margin.

But I don't understand relation of monetary expansion to inflation.

[Cat1864]

Those ten people have limited resources. If each of them has ten dollars, then the most any one of them can pay is $10. Say someone from outside the group gives them additional funds. What happens to the price of the product? Is the product worth more? Did anything change in its production?

[ma0641]

But I don't understand relation of monetary expansion to inflation.


Look at what happened in "Living Wage" cities. People all of a sudden had more money to spend. Great. Now look what happened to housing prices and rents. In Washington and Oregon, they went up dramatically. Oh Yes, so did income taxes!
Here is an NC study

Living wage standard increased, organization points to rising housing costs - Carolina Public Press