Always good to remember that when a politician starts a statement with a "Reminder" they are not telling you the objective truth they are reminding you of a political truth that makes their side look better but is actually not anywhere near reality.
Things you should understand:
An increase in government spending can contribute to inflation if it leads to an increase in demand for goods and services, which in turn can lead to higher prices. However, it is not necessarily true that all inflation is caused by government spending.
When the government spends money, it injects more money into the economy, which can increase demand for goods and services. If the supply of goods and services is unable to keep up with this increased demand, prices may rise as a result. This is known as demand-pull inflation.
Additionally, if the government pays for its spending by printing more money, this can lead to an increase in the money supply, which can also contribute to inflation. This is known as monetary inflation.
However, inflation can also be caused by factors such as changes in global commodity prices, supply chain disruptions, and shifts in consumer behavior. Therefore, while government spending can contribute to inflation, it is not the sole cause of inflation and there are many other factors that can contribute to it.
In actuality, inflation is a sustained increase in the general price level of goods and services in an economy over time. There are several factors that can cause inflation, including:
1. Increase in demand: When demand for goods and services in an economy increases, but the supply remains constant, prices will rise to reflect the scarcity of these goods and services.
2. Increase in production costs: If the cost of producing goods and services rises, businesses will have to increase their prices to maintain their profit margins.
3. Increase in money supply: When the supply of money in an economy increases, there is more money available to purchase goods and services, leading to an increase in demand and higher prices.
4. Decrease in supply: When the supply of goods and services decreases due to natural disasters, political instability, or other factors, the scarcity of these goods and services can lead to higher prices. See Covid!
5. Expectations of inflation: When people expect prices to rise in the future, they may start to demand higher wages and prices, which can become a self-fulfilling prophecy and lead to inflation.
6. Exchange rate changes: If the value of a country's currency decreases relative to other currencies, the cost of importing goods and services will increase, leading to higher prices.
It's important to note that inflation is a complex phenomenon and can be influenced by a combination of all these factors, as well as other economic, social, and political factors like a pandemic that created supply chain disruptions,
Increased demand for certain goods like medical supplies and home office equipment, stimulus measures, labor shortages, and the increase in online shopping caused even more supply chain issues.
