explain interaction between cost push inflation and demand pull inflation

视频信息

答案文本 复制

视频字幕 复制

Inflation is a general increase in prices and fall in the purchasing value of money. There are two main types of inflation. Demand-pull inflation occurs when aggregate demand exceeds the economy's production capacity, pulling prices upward. This is represented by a rightward shift of the aggregate demand curve. Cost-push inflation occurs when production costs increase, such as wages or raw materials, pushing prices upward. This is shown by a leftward shift of the aggregate supply curve. Demand-pull inflation occurs when aggregate demand increases faster than the economy's production capacity. This can be caused by increased consumer spending, lower interest rates, government stimulus, or export growth. When aggregate demand shifts rightward from AD₁ to AD₂, it creates a new equilibrium at a higher price level and higher output. This leads to higher prices, economic growth, potential resource scarcity, and rising wages as businesses compete for limited resources. The increased demand 'pulls' prices upward throughout the economy. Cost-push inflation occurs when production costs increase, forcing businesses to raise prices to maintain profit margins. These cost increases can come from rising raw material prices, wage increases, supply chain disruptions, or monopolistic pricing power. When aggregate supply shifts leftward from AS₁ to AS₂, it creates a new equilibrium at a higher price level but lower output. This leads to higher prices, reduced economic output, potential stagflation, and decreased purchasing power. The increased costs 'push' prices upward throughout the economy. The two types of inflation often interact and reinforce each other in a cycle. Demand-pull inflation can lead to cost-push inflation when increased demand raises output, causing firms to hire more workers. As the labor market tightens, wages rise, increasing production costs. Firms then raise prices to maintain profits, creating cost-push inflation. Conversely, cost-push inflation can lead to demand-pull inflation when rising costs lead to higher prices, prompting workers to demand higher wages. These higher wages increase spending power, boosting aggregate demand and causing prices to rise further. This creates a wage-price spiral where each type of inflation feeds into the other, making inflation more persistent and difficult to control. To summarize, demand-pull inflation occurs when aggregate demand exceeds production capacity, pulling prices upward. Cost-push inflation occurs when production costs increase, pushing prices upward. These two types of inflation often interact and reinforce each other in a wage-price spiral. Demand-pull can lead to cost-push through labor market tightening and wage increases, while cost-push can lead to demand-pull when higher wages increase spending power. This interaction makes inflation more persistent and difficult to control. Policy implications include using monetary policy to address demand-pull inflation, supply-side policies for cost-push inflation, and a comprehensive approach when both types interact in a wage-price spiral.