- Cost Push Inflation - higher production cost, which increases prices. Usually the result of a supply shock. Increasing costs pushes producers to increase prices.
- Ex.) If there is a drought causing crops to die, farmers will increase the price of their crops.
- Demand Pull Inflation - too many dollars chasing too few goods. Demand pulls up prices, therefore you create a shortage and an over-heated economy, with excessive spending but the same amount of goods.
- Ex.) Lil Wayne's concert price are going to increase, because there is only a limited number of seats.
- Political Panic - depression and recession.
How inflation helps or hurts people.
- Hurts
- Leaders - loan money at a fixed rate.
- Fixed Income - social security.
- Savers
- Fixed Wages - teachers whose wages are locked in.
- Helps
- Debtors - depending on the interest rate.
Hey Nancy. I was having trouble with the types of inflation. I kind of understand the three different inflation types, but could you maybe include some examples of each one? I think it would help if you would give a scenario where each inflation existed. Other than that I appreciate the colors and set up of your blog.
ReplyDeleteThank you for the input, I added the example to the first two type of inflation.
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