Cost-Push Inflation vs. Demand-Pull Inflation: What’s the Difference?

Cost-Push Inflation vs. Demand-Pull Inflation: What’s the Difference?

Unravel the complexities of economic inflation as we delve into the contrasting dynamics of Cost-Push and Demand-Pull Inflation. Understand their unique characteristics, causes, and impacts, and explore how they shape the economic landscape differently.

Cost-Push Inflation vs. Demand-Pull Inflation: An Overview

There are four main drivers behind inflation: cost-push inflation, which is the decrease in the aggregate supply of goods and services stemming from an increase in the cost of production.

Special Considerations

Supply-side policies need to be enacted with the goal of increasing aggregate supply

Cost-Push Inflation

When the aggregate supply of goods and services decreases because of an increase in production costs

Demand-Pull Inflation

This occurs when there is an increase in aggregate demand, categorized by the four sections of the macroeconomy: households, businesses, governments, and foreign buyers

Source

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