Causes Of Cost-Push Inflation

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Cost-push inflation is an alleged type of inflation caused by substantial increases in the cost of important goods or services such as inputs like labour, raw material, etc. The increased price of the factors of production may cause a decline of supply of these goods. While the demand remains constant, the prices of commodities increase lead a rise in the overall price level. Not only that, Cost-Push Inflation can be also caused by: • Increasing of the price of the commodities. For example. The rise in price of petrol oil cause higher transport cost. • Higher tax. If the government increase the taxes, it will lead to higher prices of goods and service therefore the CPI increase. • Increasing in wages. Wages is one of expenses of a firm. Rising…show more content…
Price Inflation is the percentage increase in the price of the basket of the products over a specific period of time. The Price Deflation is the percentage decrease in the price of the basket of the products over a specific period of the time. The formula can change to percentage when use the formula multiple with 100 to get “The Inflation Rate”. The rate of inflation of formula measures the percentage change in purchasing power of a particular currency. As the cost of prices increase, the purchasing power of the currency will decrease. The rate of inflation formula shown uses the Consumer Price Index which is released by the Bureau of Labour Statistics in the US. If another index is used, “CPI” in the rate of inflation formula is replaced by the alternate index. The rate of inflation is primarily used by economists. On the financial side, the rate of inflation may be used by corporations to compare expenses, revenues, and profit across multiple years. The rate of inflation formula shown is not to be confused with the purchasing power of goods relative to income. As with annualizing any monthly rate, the monthly rate of inflation cannot be annualized by simply multiplying it by 12, because this does not consider compounding. The same concept can be applied to adding each monthly percentage change in the consumer price index as an attempt to find the annual percentage change in the consumer price index. The proper…show more content…
BNM also announced that the ringgit depreciated against most of the currencies of Malaysia’s trading partners to amid news of growing inflation. The cause of depreciation of ringgit was blamed on the anticipation of the scale-back of US Federal Reserve’s programs to support the US economy. However, outlook of the national economy still consider positive. According to the Star, Alliance Research chief economist Manokaran Mottain expects inflation rate in Malaysia to average 3.2% and peak at 3.8% in August. However, he also expects the national economy to see a 5% year-on-year growth next year, an improvement from the estimated 4.6% growth estimated in 2013. Another article from The Star quoted Edward Lee Wee Kok, regional head for Standard Chartered Bank’s South East Asia Global Research, as saying that Malaysia’s inflation rate is projected to be at 3.4% for the first three quarters of 2014 due to slower consumption, as a result of higher prices on consumer goods. The firm also cited subsidy rationalisation as a reason behind its inflation projection. Lee said their forecast for Malaysia’s economic growth for 2014 is

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