What is cost-push inflation?

Cost-push inflation refers to the scenario in which the overall prices of goods and services rise due to increases in the costs of production. This typically happens when the costs of wages and raw materials increase, which then leads producers to pass these higher costs onto consumers in the form of higher prices.

When wages rise, for example, companies face higher labor costs. Similarly, if the price of raw materials increases due to factors such as supply chain disruptions or resource scarcity, producers might also feel compelled to raise their prices. This inflation is a direct result of the higher costs of inputs rather than an increase in demand for goods and services, which distinguishes it from demand-pull inflation, where price rises are linked to increased consumer demand.

The other options mention factors like government spending cuts, increased public demand, and higher consumer taxes, which are not responsible for causing cost-push inflation. Instead, they represent different economic scenarios that can affect the economy in other ways.