How Do Different Types of Inflation Impact Businesses?
There are different types of inflation, each with distinct effects on businesses:
Demand-pull Inflation: Occurs when demand for goods and services exceeds supply, often leading businesses to raise prices to manage excess demand. Cost-push Inflation: Results from increased costs of production, such as rising raw material prices, which compel businesses to raise prices to maintain margins. Built-in Inflation: Linked to adaptive expectations, where businesses and workers expect ongoing inflation, leading to a wage-price spiral.