Definition
- Cost-push inflation
- Cost-push inflation is a rise in the price level caused by higher input prices, such as oil or labour, across most firms.
- Not to be confused with: Demand-pull inflation
- Demand-pull inflation is a rise in the price level caused by aggregate demand growing faster than the economy's ability to supply output.
Test yourself
What is the difference between cost-push inflation and demand-pull inflation?
Demand-pull starts with spending and raises output with prices; cost-push starts with costs and cuts output as prices rise.