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Cost inflation


In Keynesian economics inflation due to increases in particular Pnces or wage rates being passed round the economy. Increases in costs cause producers to raise prices; increases in prices cause workers to demand higher wages; and increases in wages in one occupation lead to demands for increases in others to restore differentials. The cumulative effect of all these processes leads to a cost-inflationary spiral, which it is extremely difficult to stop. See also demand inflation; wage-price spiral.


Reference: Oxford Press Dictonary of Economics, 5th edt.