What are the different types of inflation?

There are two types of inflation. The first, cost-push inflation, is where the RPI rises due to increased costs for firms across the macroeconomy. This could be down to a rise in the cost of imported raw materials, and what it leads to is producers passing on the increased costs in the form of higher prices to consumers.
The second is demand-pull inflation, which is where the demand for goods and services in an economy outweighs the productive capacity of the economy. In short, there is too much money chasing too few goods. This can be evaluated in detail using the Keynesian AD-AS diagram, where the degree of spare capacity in the economy dictates the rate of inflation.

TB
Answered by Tom B. Economics tutor

2093 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

How can the Central Bank use Monetary Policy to achieve Economic Prosperity


Why does the demand curve slope downwards?


Describe and explain one supply-side policy aimed at shifting the long run aggregate supply curve.


Evaluate policies which a UK government could use to control the activities of oligopolists.


We're here to help

contact us iconContact ustelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

MyTutor is part of the IXL family of brands:

© 2026 by IXL Learning