The diagram on the left shows cost push inflation.But why have the cosst risen?
Why have the costs of materials risen? One answer is that there is a high demand for them. Thus the 'cost push inflation' has been caused by demand.
Which means that it's nOT cost-push inflation...doesn't it?
In which case does cost-push inflation exist?
Cost push inflation occured only when there is a continous rise in the general price levels due to increasing output costs, which means that a high cost of inputs lead to a fall in aggregate supply where aggregate demand remain constant.
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