The cost-push story of inflation is not consistent with the original Phillips Curve.

Question

Quizplus · Accepted Answer

The original Phillips Curve posited an inverse relationship between unemployment and inflation, with the implication that inflation was driven by demand-pull factors (i.e. excess demand pushing prices up). The cost-push story of inflation, on the other hand, suggests that prices are driven up by an increase in production costs, such as wages or raw materials, rather than by demand factors. Therefore, the cost-push story is not consistent with the original Phillips Curve.

The Cost-Push Story of Inflation Is Not Consistent with the Original