This year, prices have drastically increased around the country. From grocery store produce, to gas prices and food. Inflation is essentially a rate at which the value of currency or money falls which then increases the level of prices on goods and services. The three types of inflation are demand-pull, cost-push and built-in. 

 

Demand-pull inflation generally describes how demand for goods and services can drive up their prices. Normally, if something is in short supply, businesses and corporations can get people to pay more for that product. This is why, lately, consumer spending has been high due to the demand for goods. If wages rise this can also contribute to demand-pull. 

 

Nathaniel Gallegos is a professor at Missouri Western in the Social Science department. Gallegos teaches online courses in the economics program but also does full time work in Utah for the Department of Commerce. Gallegos also teaches at SJ Quinney College of Law. 

 

“Demand-pull inflation, let me start with this.” Gallegos said. “During the pandemic everyone had to stay home and no one could go out and spend their money on vacations or anything really. For like a whole year and a half we couldn't go anywhere. So we had all that money that we would spend going out and we saved it all. Also people started baking and so all this weird stuff was happening and there was a change in demand. So, of course, prices rise which causes inflation everywhere” 

 

Essentially, since everyone was buying their goods online and having things delivered, prices of everything increased. Which is how demand-pull works which also leads into cost-push inflation. 

 

Cost-push inflation is considered to be a bad form of inflation. This is where raw materials and products costs will increase for a business causing that business to raise their prices regardless of the demand. For instance, if the price of chicken goes up, a restaurant that serves chicken will also have to raise the prices of that menu item. This is happening a lot right now because in order for businesses to stay in business, they have to keep up with cost-push. 

 

“All the labor during the pandemic shut down and you couldn’t really go to work.” Gellegos said. “There was a stall and so goods couldn’t go into the market and so there was cost evolved with that. The cost shortages were causing the demand shortages. It was bad and it's still bad because it's still going through our economy.”    

 

The last form of inflation is Built-In inflation. Built-in inflation is sort of what we see in effect to cost-push and demand-pull. When those two occur, there are then labor and employment issues. For instance employees might start asking for a raise and if employers don’t keep their wages competitive they could end up in a labor shortage. 

 

“This is called built in inflation or systemic inflation and this is the inflation that we want.” Gallegos said. “The chairman of the federal reserve, what he does is raises interest rates so that's how you borrow money so the rate you have to pay back.” Gallegos said. “Since he's raised that up it's cooling consumer spending so now a lot of people are saving more but the bad thing about that is it puts the brakes on the economy. That's sort of what everyone is watching right now is whether a recession is gonna come out of this.” 

 

The issue people are having and the converse behind inflation is whether this leads to a recession. The United States hasn’t seen a recession in a long time- in fact the last recession was in 2008. A recession is a temporary halt or decline in the economy causing trade and industrial activity to decline. It’s important to pay attention to the little things evolving our economy. Next time you go to your favorite coffee shop and the prices suddenly rise then you’ll know it had something to do with inflation.

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