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AS Macro Key Term: Inflationary Pressure

Geoff Riley

5th April 2011

Inflationary pressures refers to the demand and supply-side pressures that can cause a rise in the general price level. Demand-pull inflationary pressure is greatest when actual GDP exceeds potential GDP causing a positive output gap. Cost-push inflationary pressure can arise from increases in unit wage costs, rising import prices and an increase in the prices of raw materials, fuel and components used in production.

Cost push inflationary pressures

Input prices for UK manufacturers

Data from Timetric.

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PPI, Input prices of all materials & fuel for manufact., month, UK from Timetric

Unit labour cost inflation for the UK

Data from Timetric.

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United Kingdom from Timetric

UK Output Gap
(Difference between actual and potential GDP, expressed as a % of potential GDP)

Data from Timetric.

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United Kingdom from Timetric

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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