How does Inflation Happen?

Answer

Inflation happens when excessive amounts of money are pumped into an economy as a means of stimulation. This causes the value of existing money to decrease. Think about old hard nail polish. A drop or two of polish remover will re-vitalize, but filling the bottle will dilute the polish and perhaps destroy it completely.
1 Additional Answer
Inflation happens due to a number of different factors. It can be caused by increased taxes, high levels of lending and an excess of money being printed. You can find more information here: www.economywatch.com
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