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7 Cards in this Set
- Front
- Back
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Cost Push Inflation |
Inflation caused by rising business costs such as labour and raw materials |
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Menu Costs |
Costs to firms having to make repeated price changes |
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What causes cost push inflation? |
Increased wages (trade unions) Increased cost of production Rising Taxes Rising costs of imported goods (oil) |
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Cost Push effects on employment |
Reduces unemployment Firms want to sell more More workers |
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Cost push effects on wages |
Have to rise Workers need more money So they can afford the general standard of living |
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Cost push effects on exports |
If price rises it is difficult to sell in overseas markets. Go out of businesses. Cyclical effect |
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Why is a sustained rate of inflation important to a countrys economic growth? |
It drives up consumer spending as they expect prices to increase. Therefore theyd spend more before prices rise further therefore more gdp |
