The unstable economy and level of sales in a country is prone to be the cause of inflation. This inflationary condition is highly avoided by the state because it will trigger a mild to severe economic crisis. The state must be able to prevent inflation because it can cause various kinds of problems.

According to Bank Indonesia, inflation is simply defined as a general and continuous increase in prices over a certain period of time. An increase in the price of one or two goods alone cannot be called inflation unless the increase is widespread or results in an increase in the price of other goods. Quoted from various sources, the following factors cause inflation in the economy:

1. Demand-Pull Inflation

This inflation is also known as the Philips Curve Inflation. In general, this inflation is caused by supply and demand for goods or services in the country for the long term needed by the public in large quantities. This inflation is common in countries with rapid economic growth. High job opportunities lead to a high level of community income.

2. Cost-Push Inflation

This inflation is caused by a continuous increase in production costs for a certain period of time. In general, the rising production cost inflation was due to the pressure on the cost of production factors that continued to rise. This type of inflation is common in countries with developing or rapidly growing economic growth but with a fairly low unemployment rate. In a country like this, the supply of labor is limited but the demand for a product is high.

3. Increase in the Money Supply (JUB)

This theory was put forward by the classics who stated that there was a relationship between the money supply and prices. If the number of goods remains constant but the amount of money in circulation is doubled, the price of the goods will be twice as expensive.

4. Mixed Inflation

This inflation occurs due to an increase in supply and demand. This happens because of an imbalance between supply and demand. When the demand for a good or service increases, then the supply of goods and factors of production decreases. Meanwhile, substitutes or substitutes for these goods and services are limited or non-existent. This imbalance will cause the prices of goods and services to rise.

5. Expected Inflation

Expected inflation occurs as a result of the behavior of people who think that economic conditions in the future will be even better. This type of inflation is difficult to detect because its occurrence is not too significant.

6. Structural Rigid Economy

Producers cannot prevent the rapid increase in demand caused by population growth. Finally, demand is difficult to meet when there is population growth.

7. Economic and Political Chaos

When a country is in an unsafe condition, the prices of goods in that country tend to be expensive. This also happened in Indonesia when there was political and economic turmoil in 1998. At that time, the inflation rate in Indonesia reached 70 percent, whereas the normal inflation rate ranged from 3 to 4 percent.

8. Company Decision

Sometimes inflation occurs naturally when supply decreases and demand increases, but other times inflation is regulated by companies. Companies that make popular goods often raise prices simply because consumers are willing to pay the increased amount. Companies also raise prices freely when the goods being sold are something consumers need for their daily existence, such as oil and gas.