BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -Cost-push inflation is caused by wage increases enforced by unions and profit increases by employers. The type of inflation has not been a new phenomenon and was found even during the medieval period. But it was revived in the 1950s and again in the 1970s as the principal cause of inflation.

Detailed explanation-2: -Examples of Cost-Push Inflation Electric power suppliers need high levels of natural gas to create electricity. When global policies, war, or natural disasters drastically reduce the oil supply, gasoline prices rise because demand remains relatively stable even as supply shrinks.

Detailed explanation-3: -Cost-push inflation can occur when higher costs of production decrease the aggregate supply (the amount of total production) in the economy. Since the demand for goods hasn’t changed, the price increases from production are passed onto consumers creating cost-push inflation.

Detailed explanation-4: -Further, cost-push inflation also affects employment as the decline in real GDP results in decreased demand for goods and services, which compels firms to lay off workers and reduce work. This type of inflation results in a fall in living standards.

Detailed explanation-5: -Cost-push inflation happens when there is a decline in the supply of goods and services and demand remains unchanged or even grows, driving prices and inflation higher.