Difference Between Inflation And Pull Inflation

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INFLATION (1) Inflation is the rate at which the general level of prices for goods and services rises over a period of time. (2) Inflation can be divided into two categories: (a) demand-pull inflation and (b) cost-push inflation. a) In demand-pull inflation price increase results from an excess of demand over supply for the economy as a whole. It occurs when critical factors of production are being fully utilized but supply cannot expand further to meet new levels of demand. b) Cost-push inflation occurs when price levels increase due to the rising cost of inputs. There are three factors that could contribute to cost-push inflation: rising wages, an increase in taxes, and imported inflation. (3) Inflation can be caused by many different…show more content…
Higher importation prices: increases in the costs of imported products will result in a depreciation of the home currency which means consumers pay more for the same amount of goods. Higher costs of raw materials: increases in the costs of raw materials results in the same situation as increases in importation prices; namely consumers end up paying more for the same amount of goods. Profit Push Inflation: when firms push up prices to get higher rates of inflation. This is more likely to occur during strong economic growth. Decreasing productivity: when firms/companies become less productive and allow costs to rise, this invariably leads to higher prices. Increase in taxes: when the government increase taxes, such as VAT and Excise duty, this will lead to higher prices. (4) An increase in costs for things such as food, water, electricity and other goods and services, affects the entire economy. Rising prices affect the cost of living, the cost of doing business, the cost of borrowing money,…show more content…
The downturn in employment was blamed on massive uncertainty in the economic outlook and the inadequacy of policies to correct the situation. The effects of the financial crisis in the Caribbean region was revealed in a number of challenges faced by these smaller economies. For example, the decline in the tourism industry on islands like The Bahamas and the decline in exports of key commodities like bauxite in Jamaica. These negative consequences of the crisis contributed to increasing unemployment in the region. These harmful effects in the Caribbean economies were largely attributed to the dependence on the United States and the United Kingdom as trade partners and as sources of direct foreign investment. Consequently, unemployment levels rose. In order to improve their chances of obtaining sustained growth rates in the medium to long term, Caribbean countries should seek to develop their trade and economic relations with the new growth poles of the world economy, namely countries like China, Brazil, India and
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