Definition: Cost-push inflation occurs when we experience rising prices due to higher costs of production and higher costs of raw materials. Cost-push inflation is determined by supply-side factors, such as higher wages and higher oil prices. Cost-push inflation is different to demand-pull inflation which occurs when aggregate demand grows faster than aggregate supply. Cost-push inflation …
Definition – A maximum price occurs when a government sets a legal limit on the price of a good or service – with the aim of reducing prices below the market equilibrium price. For example, the government may set a maximum price of bread of £1 – or a maximum price of a weekly rent …
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Cost-push inflation is caused by higher costs of production, such as rising oil prices, higher nominal wages, and increased commodity prices. To reduce this kind of inflation, the government can pursue deflationary monetary policy and/or supply side policies. But, in truth, it is difficult to reduce cost-push inflation because higher interest rates are likely to …