Do we use the price index system?© BrainMass Inc. brainmass.com October 24, 2018, 9:40 pm ad1c9bdddf
In economics, inflation is an increase in the general level of prices of a given kind. General inflation is referred to as a rise in the general level of prices.
The text "Economics" (2nd Edition) by Parkin and Bade gives the following explanation for cost-push inflation:
"Inflation can result from a decrease in aggregate supply. The two main sources of decrease in aggregate supply are
* An increase in wage rates
* An increase in the prices of raw materials
These sources of a decrease in aggregate supply operate by increasing costs, and the ...
Cost-Push Inflation is highlighted.
Explain how cost-push inflation might prompt policymakers to take actions that subsequently cause demand-pull inflation. Explain how this demand-pull inflation could lead to another round of cost-push inflation. Illustrate this process graphically using the aggregate demand-aggregate supply model.View Full Posting Details