Explain demand-pull, cost-push, and built-in inflation. Also, explain imported inflation.

PART B: SHORT ANSWER QUESTIONS

QUESTION 6:
Here are three types of inflation:

• Demand-pull inflation: Occurs when aggregate demand in an economy outpaces aggregate supply, leading to higher prices.
• Cost-push inflation: Occurs when the cost of producing goods and services increases, forcing businesses to raise their prices.
• Built-in inflation: Occurs when workers demand higher wages to maintain their real income due to rising prices, and businesses pass these higher labor costs onto consumers through increased prices, creating a wage-price spiral.

QUESTION 7:
Imported inflation is caused when the prices of imported goods and services increase. This can happen due to a depreciation of the domestic currency, making foreign goods more expensive, or due to rising prices in the exporting countries. When these more expensive imported goods are either final consumer goods or intermediate goods used in domestic production, they lead to higher prices within the importing country.