ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Cost-push inflation (also known as wage-push inflation) occurs when overall prices increase (inflation) due to increases in the cost of wages and raw materials.

Detailed explanation-2: -More jobs and higher wages increase household incomes and lead to a rise in consumer spending, further increasing aggregate demand and the scope for firms to increase the prices of their goods and services. When this happens across a large number of businesses and sectors, this leads to an increase in inflation.

Detailed explanation-3: -Cost-push inflation occurs when the supply of a good or service changes, but the demand for it stays the same. It occurs most often when a monopoly exists, wages increase, natural disasters occur, regulations are introduced, or exchange rates change.

Detailed explanation-4: -One theory suggests commodity prices respond quickly to general economic shocks such as increases in demand. The second is that changes in prices reflect systemic shocks, such as hurricanes which can decimate the supply of agricultural products and subsequently increase supply costs.

Detailed explanation-5: -Cost-push inflation could be caused by a rise in oil prices or other raw materials. Imported inflation could occur after a depreciation in the exchange rate which increases the price of imported goods.