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ADB: An abbreviation that stands for either the African Development Bank the Asian Development Bank. The African Development Bank is a regional multilateral development institution engaged in promoting the economic development and social progress of its member countries in Africa. The Bank, established in 1964, started functioning in 1966 with its Headquarters in Abidjan, Cote d' lvoire. The Bank borrows funds from the international money and capital markets. Its shareholders are the 53 countries in Africa as well as 24 countries in the Americas, Europe, and Asia. The Asian Development Bank is a multilateral development finance institution dedicated to reducing poverty in Asia and the Pacific that engages in mostly public sector lending for development purposes in its developing member countries. They pursue this goal by helping to improve the quality of people's lives providing loans and technical assistance for a broad range of development activities. ADB raises fund through bond issues on the world's capital markets but they also rely on members' contributions. The ADB was established in 1966 and has its headquarters in Manila, Philippines. As of September of 2003, the ADB had 58 member countries.
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                           COST-PUSH INFLATION: Inflation of the economy's average price induced by decreases in aggregate supply that result from increases in production cost. This type of inflation occurs when the cost of using any of the four factors of production (labor, capital, land, or entrepreneurship) increases such that aggregate supply cannot satisfy aggregate demand. The alternative type of inflation is demand-pull inflation. Cost-push inflation places responsibility for inflation squarely on the shoulders of decreases in aggregate supply. In general, higher production cost means the economy simply cannot continue to supply the same production at the same price level. If buyers want the production, they must pay higher prices. The higher cost "pushes" the price level higher.- In terms of the production possibilities analysis, this means that the production possibilities frontier is shrinking closer to the origin, causing it to bump down against the aggregate demand. The end result is inflation.
- In the aggregate market analysis, aggregate supply decreases to less than aggregate demand creating economy-wide shortages. As with any market shortages, the price (price level) rises. The end result is inflation.
While any of the factors of production "could" trigger cost-push inflation, labor and land are the two factors most likely to do so--especially wages and energy prices.- In particular, wages paid to labor generally account for about two-thirds of the cost of producing output. Almost any general increase in wages surface as a substantial, economy-wide, increase in production cost. If workers, in total, receive higher wages, then production cost increases, and cost-push inflation is triggered.
- A similar argument can be made for certain raw material inputs coming from the land, most notably petroleum. Unlike most other materials, petroleum plays an integral role in virtually every good or service produced in the economy, either as a direct material input or as an energy source. Because it is such a pervasive input, any increase in the price of petroleum translates into higher economy-wide production cost, triggering cost-push inflation.
Like demand-pull inflation, cost-push inflation can be sustained only if the economy has more MONEY available. Higher wages or petroleum prices might temporarily cause higher production cost, higher prices, and inflation, but if the buyers do not have the MONEY, then those prices will NOT remain high and inflation will not persist. If producers cannot pay the higher wages and petroleum prices (because they have no more money), then the resource owners will adjust the prices down. Alternatively, producers might reduce payments to other inputs or factors of production. While higher production cost can trigger cost-push inflation in the short-term, this inflation cannot be sustained without increases in the money supply.
 Recommended Citation:COST-PUSH INFLATION, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2025. [Accessed: July 18, 2025]. Check Out These Related Terms... | | | | | | | | | | | Or For A Little Background... | | | | | | | | | | | | And For Further Study... | | | | | | | | | | | | | | | | |
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The first paper currency used in North America was pasteboard playing cards "temporarily" authorized as money by the colonial governor of French Canada, awaiting "real money" from France.
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