Cost Push and Demand Pull There are many theories as to why inflation is created. The two particularly most intertwined with one and other are cost-push and demand-pull inflation. These two theories are generated from the ideas of John Maynard Keynes. Both “cost push and demand pull inflation can vastly affect an economic system that is stable because inflation is bound to increase. Cost-push inflation has direct affects on many things in an economy; first …showed first 75 words of 1253 total…

…showed last 75 words of 1253 total…producers increase their output of autos, they will demand more steel used in producing those cars. The price of steel and other inputs used in the production of autos will also rise. This reaction is similar to the wage price spiral that cost-push inflation creates. As shown in these examples, demand push and cost-pull are very close in how they affect an economy. Both theories are employed in our everyday life and affect us greatly.