Nama : Mukminatul Maulidia

NIM : 043845004
Diskusi 5 ADBI4201

Q : After studying the fifth session topic entitled Inflation and also read the additional material,
please give your own opinion about the following issue. One of the factors that causes inflation
is Cost-push Inflation. Please explain how Cost-push Inflation occur, and give the real example
of this inflation.

A : Cost push inflation is a fairly large inflation phenomenon and its existence is considered to
be very detrimental to many parties. One of the causes of cost push inflation is the depreciation
or contraction of the economic system.
This means that cost push inflation can occur if production activities in the world economy are
experiencing a severe decline and make the domestic circulation of money lose stability so that it
has an impact on increasing product prices on the market.
That is why many experts state that the existence of cost push inflation is a sign that the economy
is in danger.
This phenomenon generally occurs due to cost push or cost push (production cost surge) which
can be seen through the cost push inflation curve

Causes of cost push inflation

In the world of economy, cost push inflation is a phenomenon that can occur due to several main
factors, namely:
1. Great work wages
In the process of producing goods, cost push inflation usually occurs because the wages
of workers are considered too large but not proportional to the quality of their production.
This phenomenon is believed to be detrimental to many parties because it has a direct
effect on the value of the company's income.

2. Devaluation
Cost push inflation is an economic phenomenon that can occur due to the practice of
devaluation. Referring to the definition according to the KBBI, devaluation is a deliberate
decrease in the value of a currency against the currency of another country by the
government.
This phenomenon can also have an impact on the increase in the price of production raw
materials obtained by import, causing the circulation of money to become unstable.

3. Raw material price

Rising raw material prices can also affect the production process and cause cost push
inflation. Well, the raw materials in question are also quite diverse, such as oil or other
natural resources whose supply is running low.
 4. Tax
The next cause of cost push inflation is taxes. The phenomenon that can be classified as
cost push inflation is cigarette production. As you know, cigarette excise taxes are
notoriously high and even increase from time to time.
In this case, the tax burden tends to be imposed on consumers by increasing the selling
price, resulting in the phenomenon of cost push inflation

Example of cost push inflation

To maintain transparency, the government usually releases data on fundamental analysis of the
domestic economy, including data on exports, imports, trade balances and inflation at the
beginning of each month.
Well, from the report, one example of cost push inflation is a massive decline of up to 0.50% in
the Indonesian economy due to the global economic crisis in 2015.
In fact, Agus DW Martowardojo, governor of Bank Indonesia at that time, also stated that 2015
was a year of testing for the Indonesian economy. His party explained that the inflation occurred
due to fluctuations in food prices because the harvest did not match expectations.

Source : https://www.ocbcnisp.com/id/article/2022/02/10/cost-push-inflation