Cost-push inflation occurs when the overall price levels rise due to increases in the cost of production. This can happen when there are supply shocks, such as a sudden rise in the prices of raw materials, labor, or energy. As production costs increase, businesses may pass these costs onto consumers in the form of higher prices, leading to inflation.
Key factors that contribute to cost-push inflation include:
Ultimately, cost-push inflation can lead to a stagnation in economic growth as consumers reduce their spending due to higher prices, creating a challenging economic environment.
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