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Which of the following comes under different types of inflation? Cost-push Inflation Demand-pull Inflation Built-in Inflation

Which of the following comes under different types of inflation? Cost-push Inflation Demand-pull Inflation Built-in Inflation Correct Answer All of these

The correct answer is All of these

  • Demand-pull inflation is caused by increases in aggregate demand due to increased private and government spending, etc.
  • The demand-pull theory follows that the rate of inflation accelerates whenever aggregate demand is increased beyond the ability of the economy to produce (its potential output). 
  • Cost-push inflation is caused by a fall in aggregate supply which may be due to natural disasters, or increased prices of inputs. 
  • Producers for whom oil is a part of their costs could then pass this on to consumers in the form of increased prices.
  • Built-in inflation is motivated by adaptive expectations, and is often linked to the “price/wage spiral”. It involves workers trying to keep their wages high with prices (above the rate of inflation), and firms passing these higher labor costs on to their customers as higher prices.

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