College Preparatory Program • Saudi Aramco
Cost-Push Inflation and Stagflation
Microeconomic Tips
Cost-Push Inflation and Stagflation
Summary:

As costs of production increase (usually due to cost of labor and raw materials),
producers are forced to push up the price level.

Prices increase as Real GDP (GDP – Inflation) decreases.
This blend of economic factors is referred to as Stagflation.

As Aggregate Supply Decreases, the price of products increases,
leading to a decrease in AD due to higher pricing.