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Cost-push inflation

Cost-push inflation is a type of inflation that occurs when the cost of production increases, leading to higher prices for goods and services. This type of inflation can be caused by a variety of factors, such as an increase in the cost of raw materials, a rise in labor costs, or an increase in taxes. As the cost of production goes up, companies may pass the increased costs on to consumers in the form of higher prices, which leads to overall price level increases and inflation. Cost-push inflation can be contrasted with demand-pull inflation, which occurs when there is increased demand for goods and services, leading to higher prices.

Cost-push inflation occurs when businesses respond to rising unit costs by increasing prices to protect their profit margins. Costpush inflation can come about from both domestic and external sources including a fall in the external value of the exchange rate which then leads to a rise in prices of imported products.

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