Question 2 of 5Change question

What causes inflation?

The 2021–23 inflation is where these answers were tested in real time. See the Debates tab.

Mainstream
Monetarism
Too much money chasing too few goods. Control the growth of money.
Mainstream
New Keynesian economics
Demand running ahead of capacity, plus expectations. The central bank anchors expectations by raising real interest rates.
Mainstream
Keynesian economics
Demand-pull when the economy overheats, and cost-push from wages and energy prices.
Heterodox
Post-Keynesian economics
Mostly cost-push and conflict over income shares. ECB staff found rising profits accounted for about two-thirds of euro-area domestic inflation in 2022, with wages catching up later.
Heterodox
Modern Monetary Theory
Spending beyond what the economy can physically produce. Manage it with taxes and targeted policies rather than interest rates.
Heterodox
Austrian school
Central banks expanding credit. Inflation is a hidden tax that distorts the signals prices send.
Mainstream
Ordoliberalism
A failure of monetary discipline. An independent central bank with a strict price-stability mandate is the fix.

Monetarism