What type of inflation occurs due to higher production costs?

Cost-push inflation arises when the overall price levels increase due to rising production costs. This situation can occur for various reasons, such as increases in wages, raw material costs, or other expenses associated with the production process. When producers face higher costs, they often pass those costs onto consumers in the form of higher prices for goods and services. This leads to a general increase in the price level in the economy, without a corresponding increase in demand.

Understanding the dynamics of cost-push inflation is critical for grasping how external factors affecting production can ripple through the economy, impacting both businesses and consumers. The other types of inflation mentioned, such as demand-pull inflation, focus on increases in consumer demand driving prices higher, while built-in inflation relates to wage-price spirals driven by expectations of future inflation. Hyperinflation, on the other hand, describes an extreme scenario where prices increase rapidly, often leading to a collapse in the currency's value.