Inflation - Deepstash

Inflation

  • Inflation is a situation of rising prices in the economy.
  • Inflation is a sustained increase in the general price level in an economy. Inflation means an increase in the cost of living as the price of goods and services rise.
  • The rate of inflation measures the annual percentage change in the general price level.

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Cost-Push Inflation

Cost-Push Inflation

Cost-push inflation is the decrease in the aggregate supple of goods and services stemming from an increase in the cost of production.

An increase in the costs of raw materials or labor can contribute to cost-pull inflation.

Demand-Pull Inflation

Demand-Pull Inflation

Demand-pull inflation is the increase in aggregate demand, categorized by the four sections of the macroeconomy: households, business. governments. and foreign buyers.

Demand-pull inflation can be cause by an expanding economy, increased government spending, or overseas growth.

Demand shock

Demand shocks occur when the demand for products drops as people stop earning money. A tactic to fix this is to stimulate the economy. In 2008, Australia gave households cash and encouraged them to spend to jumpstart the economy.

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