The diagram on the left shows cost push inflation. If costs rise then some of these are passed on and so prices rise - don't they?
These prices may be wages, tax or materials.
If prices rise then I have less money to buy something else. Thus my demand for 'something else' falls and the price of that 'something else' falls.
And so the cost push inflation effect is cancelled out...isn't it?
In which case cost push inflation doesn't exist....does it?
MCQ Walkthrough 9708/32 (India) (Q21 - Q30)
8 months ago