Causes Of Inflation: Cost Push And Demand Pull Inflation
Economics notes
Causes Of Inflation: Cost Push And Demand Pull Inflation
➡️ Nominal values are the current money values of goods and services, which are affected by inflation and other economic factors.
➡️ Real data is the value of goods and services adjusted for inflation, allowing for comparison of values over time.
➡️ Real data is important for economic analysis, as it allows for the comparison of economic performance over time, and helps to identify trends and patterns in the economy.
What are the two main causes of inflation?
The two main causes of inflation are cost push inflation and demand pull inflation. Cost push inflation occurs when the cost of production increases, leading to higher prices. Demand pull inflation occurs when there is an increase in demand for goods and services, leading to higher prices.
How does cost push inflation affect the economy?
Cost push inflation can have a negative effect on the economy. When the cost of production increases, businesses may be forced to raise prices in order to remain profitable. This can lead to a decrease in consumer spending, as people are unable to afford the higher prices. This can lead to a decrease in economic growth.
How does demand pull inflation affect the economy?
Demand pull inflation can have a positive effect on the economy. When there is an increase in demand for goods and services, businesses may be able to increase their prices, leading to higher profits. This can lead to an increase in economic growth, as businesses are able to invest more in their operations and hire more workers.