What Are the Three Types of Inflation?
The three primary types of inflation are: demand pull inflation, cost push inflation and wage push inflation. In addition, depreciation in the exchange of imported goods can also affect inflation.
Demand pull inflation occurs when demand for a product increases faster than the supply of the product. If a product is more in demand, companies typically push up the price of the product. Cost push inflation refers to the need to increase the cost of the product due to equipment or maintenance fees associated with production. Wage push inflation occurs when the cost to increase employee wages increases the price of the goods to cover the manufacturer's overall company costs.