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Cost-push inflation is caused by increases in production costs, leading to reduced supply and higher prices. The oil crisis of the 1970s is a significant example. Government printing more money decreases the value of existing money, contributing to inflation.
Cost-push inflation occurs when there is an increase in the costs of production, leading to a decrease in aggregate supply and higher prices. This is often caused by supply shocks or an increase in the price of production inputs.
A classic example of cost-push inflation is the oil crisis of the 1970s, where the surge in oil prices led to higher production costs across various industries.
When the government prints more money, it can contribute to inflation but not because consumers have more money to spend, rather because the increased money supply reduces the value of existing money, resulting in higher prices.
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