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A-Level Economics · SRAS shift left (cost-push inflation) diagram question

EVALUATION: why is cost-push inflation usually judged WORSE than demand-pull inflation?

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The answer

Cost-push arrives alongside a recession; demand-pull arrives alongside growth, and moderate demand-pull can even signal a healthy economy. Cost-push comes WITH a recession; demand-pull comes with growth. Moderate demand-pull around the 2% target is actively good for the economy. A leftward SRAS shift raises prices while cutting real GDP, so cost-push inflation comes alongside a recession rather than alongside growth. Demand-pull can even be read as a sign of healthy consumer optimism, and moderate demand-pull around the 2% target is actively good for growth. Diagnose which one you are looking at first — the two need very different treatment.

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