How does cost-push inflation primarily originate within an aggregate supply and demand framework?

💡 Solution & Explanation

Cost-push inflation occurs when overall prices increase due to surges in the cost of wages or raw materials like crude oil, shifting the aggregate supply curve to the left. Demand-pull inflation arises when aggregate demand for goods and services outpaces aggregate supply. Central bank money expansion typically fuels demand-pull rather than immediate cost-push pressures. Cost-push inflation presents a difficult challenge for policymakers because it simultaneously increases prices and reduces economic output.