2023-02-08 17:43:03
We hear inflation every single day in the last 1 year but what could be the causes and types of inflation?
Types of Inflation
Demand-Pull Inflation
Demand-pull inflation describes how demand for goods and services can drive up their prices. If something is in short supply, you can generally get people to pay more for it.
The U.S. is experiencing demand-pull inflation due to wages rising and Americans having a decent amount of money in their savings accounts, Blake explains, although some consumers are starting to empty those accounts.
Cost-Push Inflation
Cost-push inflation often kicks in when demand-pull inflation is going strong. When raw materials costs increase for businesses, the businesses in turn must raise their prices, regardless of demand.
When the price of chicken keeps going up, for example, eventually your favorite restaurant will need to charge more for a chicken sandwich.
Built-in Inflation
As demand-pull inflation and cost-push inflation occur, employees may start asking employers for a raise. If employers don’t keep their wages competitive, they could end up with a labor shortage.
If a business raises workers’ wages or salaries and tries to maintain profit margins by raising prices, that’s built-in inflation.
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