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- To begin with, inflation is a sustained increase in the price level of goods...
- It is night. Erik is in the midst of a discussion about Macroeconomics with his buddy Andi, who doesn't know much about the subiect but is eager to learn.
- So... today we'll be learning about the two types of inflation, as well as how they are measured.
- You sound like an NPC
- Wow! Neat!
- Ermmmm, it's actually "a" instead of "an"
- There are actually two types of inflation. Demand-pull and cost-push. Demand-pull is when there's too much demand in the economy, and prices are bid up since there's not enough of the good. Cost-push is when business have higher costs of production, so they pass these prices down to customers.
- Erik lectures Andi on the two types of inflation. His balding friend is quick to catch on, and thirsty for knowledge...
- It's simple, any time the prices for raw materials or labor rises, or if productivity in a business falls, they lose profits and have to increase their prices.
- Crazy... but how does cost-push inflation occur?
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