Cost-Push Inflation

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DEFINITION of 'Cost-Push Inflation'

A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

BREAKING DOWN 'Cost-Push Inflation'

Cost-push inflation develops because the higher costs of production factors decreases in aggregate supply (the amount of total production) in the economy. Because there are fewer goods being produced (supply weakens) and demand for these goods remains consistent, the prices of finished goods increase (inflation).

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