Uruguay's inflation rate reached $$\(8.4 \%\)$$ in July 2018. The central bank considered increasing the interest rate to reduce the inflation rate. An increase in interest rates might influence total demand in an economy and lead to an appreciation of its currency. This might influence Uruguay's exports, especially soybean exports. The total revenue of Uruguay's soybean firms might change if there is an appreciation of the Uruguayan peso. Explain two causes of inflation.

Logical explanation which might include:
Demand-pull inflation (1) increase in total demand (1) e.g. increase in
consumption / increase in investment / government spending / net
exports (1) e.g. cut in income tax / decrease interest rate / increase
employment / increase in the money supply (1).
Cost-push inflation (1) increase in costs of production (1) e.g. increase
in wages / raw material cost / profit margin / tariffs (1) e.g. wages may
rise more than productivity / fall in exchange rate would increase raw
material costs (1).